Ametek (AME) Up 1% Since Last Earnings Report: Can It Continue?
It has been about a month since the last earnings report for Ametek (AME). Shares have added about 1% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Ametek due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
AMETEK Beats Q2 Earnings Estimates
AMETEK reported second-quarter 2023 adjusted earnings of $1.57 per share, beating the Zacks Consensus Estimate by 3.3%. The bottom line rose 14% on a year-over-year basis.
Net sales of $1.65 billion came in ahead of the Zacks Consensus Estimate of $1.64 billion. The top line rose 9% year over year.
Top-line growth was driven by solid momentum across the Electronic Instruments Group (EIG) and Electromechanical Group (EMG) segments.
AMETEK’s proper execution of the four core growth strategies, including operational excellence, global market expansion, investments in product development and acquisitions, is expected to continue aiding financial growth in the near and long term. The AMETEK Growth Model is likely to continue driving AME’s business performance.
Segments in Detail
EIG (68.9% of total sales): AMETEK generated sales of $1.135 billion from the segment, reflecting growth of 10% from the year-ago quarter’s level. The figure topped the consensus mark of $1.131 billion.
EMG (31.1% of sales): The segment generated $511.5 million in sales in the second quarter, which improved by 5% on a year-over-year basis. The figure came below the Zacks Consensus Estimate of $520 million.
Operating Details
For the second quarter, operating expenses were $1.23 billion, up 6.7% year over year. The figure contracted by 130 basis points (bps) from the year-ago quarter’s level as a percentage of net sales to 74.6%.
Consequently, the operating margin was 25.4%, which expanded 130 bps from the year-ago quarter’s figure.
The operating margin for EIG expanded 130 bps year over year to 27.1% and that of EMG contracted 100 bps from the year-ago quarter’s level to 26.6%.
Balance Sheet
As of Jun 30, 2023, cash and cash equivalents were $605.6 million, up from $399.9 million as of Mar 31, 2023.
Inventories amounted to $1.11 billion at the end of the second quarter compared with $1.12 billion at the end of the prior quarter.
Long-term debt was $2.19 billion in the reported quarter, up from $2.18 billion in the prior quarter.
Guidance
For third-quarter 2023, management expects sales growth in the mid-single digits from the year-ago quarter’s reported figure.
AMETEK expects adjusted earnings of $1.56-$1.58 per share, suggesting growth of 8-9% from the year-ago quarter’s reported number.
For 2023, AME expects sales growth in the mid- to high-single digits from the 2022 level.
Further, management raised the guidance for adjusted earnings from $5.96-$6.10 to $6.18-$6.26, suggesting growth of 9-10% from the 2022 reported level.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review.
VGM Scores
Currently, Ametek has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Ametek has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
Performance of an Industry Player
Ametek is part of the Zacks Electronics - Testing Equipment industry. Over the past month, Fortive (FTV), a stock from the same industry, has gained 1.2%. The company reported its results for the quarter ended June 2023 more than a month ago.
Fortive reported revenues of $1.53 billion in the last reported quarter, representing a year-over-year change of +4.3%. EPS of $0.85 for the same period compares with $0.78 a year ago.
Fortive is expected to post earnings of $0.85 per share for the current quarter, representing a year-over-year change of +7.6%. Over the last 30 days, the Zacks Consensus Estimate has changed +0.9%.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #2 (Buy) for Fortive. Also, the stock has a VGM Score of C.
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AMETEK, Inc. (AME) : Free Stock Analysis Report
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