IEX Beats Earnings in 1Q, Revs Lag

Zacks

IDEX Corporation (IEX), an industrial goods manufacturer, delivered earnings of 74 cents per share in the first quarter of 2013, up 12% from the year-ago quarter and ahead of the Zacks Consensus Estimate of 71 cents. Net income stood at $61 million, up 10% year over year. The increase in earnings was driven by growth in operating income and margin improvement.

 Revenues

Net revenue in the reported quarter came in at $494.4 million versus $489.4 million in the year-ago quarter. Although the quarterly revenue increased year over year, it missed the Zacks Consensus Estimate of $508 million. Orders stood at $515 million, down 3% from the year-ago period.

By segments, the Fluid and Metering Technologies (:FMT) segment reported sales of $212 million, down 1.0% year over year. The Health and Science Technologies (HST) segment revenues came in at $173.0 million, inching down 1% year over year, while the Fire and Safety segment recorded sales of $112.0 million, up 7.0% year over year.

On a regional basis, North America improved in the reported quarter, while softness in the European market continued with an uneven growth in Asia.

Margins

Operating margin in the quarter was 19.2%, up 90 basis points year over year, driven by productivity and cost-cutting initiatives. Earnings Before Interest, Taxes Depreciation and Amortization (:EBITDA) stood at $116 million, up 11% from the year ago period.

The FMT segment reported operating margin of 22.7%, up 50 basis points year over year. The segment’s margin was highly influenced by the company’s high productivity and cost-cutting strategy.

The HST segment’s operating margin came in at 18.7%, up 40 basis points from the year-ago quarter due to increased production and cost reductions.

The Fire and Safety segment recorded an operating margin of 25.3%, up 200 basis points from the year-ago quarter. The year-over-year rise was primarily led by the company’s augmented productivity and higher volume.

Balance Sheet and Cash Flow

As of Mar 31, 2013, the company had cash and cash equivalents of $341.0 million, compared to $318.9 million as of Dec 31, 2012. Long-term debt increased to $815.6 million from $779.2 million at year-end 2012.

Cash flow from operating activities amounted to $72.2 million in the first quarter of 2013 compared to $58.7 million in the year-ago quarter. Free cash flow stood at $67.0 million in the reported quarter versus $52.3 million in the year-ago period.  IDEX Corporation repurchased 673,000 shares for $34 million in the reported quarter. The company also approved a 15% increase in its cash dividend to a quarterly dividend payout of 23 cents.

Acquisitions

During the reported quarter IDEX Corporation completed the acquisition of FTL Seals Technology (:FTL), a manufacturer of specialty seals and bearings. The acquisition price of 24.0 million euros (approximately $31.0 million) was paid in cash. Post acquisition, FTL will operate with Precision Polymer Engineering within the Health & Science Technologies segment.

Outlook

For the second quarter of 2013, earnings are expected in the range of 73 to 75 cents per share. For full year 2013, the company maintains its earnings guidance in the range of $2.85 to $2.95.

IDEX Corporation continues to fund organic growth while pursuing strategic acquisitions, increase dividends and remaining active on share repurchases. Going forward, the company expects low- to mid-single digit organic revenue growth in 2013

IDEX Corporation currently has a Zacks Rank #3 (Hold). Other stocks that look promising and are worth considering include The Babcock & Wilcox Company (BWC) with a Zacks Rank #1 (Strong Buy), Graco Inc (GGG) and Ingersoll-Rand, Plc (IR), each carrying a Zacks Rank #2 (Buy).
 

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