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AMETEK (AME) to Report Q4 Earnings: What's in the Cards?

Zacks Equity Research

AMETEK AME is set to report fourth-quarter 2018 results on Feb 5.

The company’s earnings topped the Zacks Consensus Estimate in all the trailing four reported quarters, the average being 6.09%.

In the last reported quarter, AMETEK’s adjusted earnings of 82 cents per share beat the Zacks Consensus Estimate by 4 cents and also improved 24.2% from the year-ago quarter.

Moreover, net sales increased 10.2% on a year-over-year basis to $1.19 billion and trumped the Zacks Consensus Estimate of $1.18 billion.

What to Expect in Q4

For fourth-quarter 2018, AMETEK expects sales to reflect 10% growth on a year-over-year basis. The Zacks Consensus Estimate is pegged at $1.25 billion, indicating a 9.7% rise from the year-earlier quarter.

Earnings are anticipated in the range of 82-84 cents per share, reflecting year-over-year growth of 17-20%. The Zacks Consensus Estimate for earnings stands at 84 cents.

AMETEK, Inc. Price and EPS Surprise

AMETEK, Inc. Price and EPS Surprise | AMETEK, Inc. Quote

Let’s see how things are shaping up for this announcement.

Factors to Consider

AMETEK’s focus on operational excellence, global market expansion, investments in product development and strategic acquisitions are key growth drivers.

The company is riding on robust organic growth and its well-performing segments. Moreover, benefits from acquisitions are acting as tailwinds. Notably, the buyouts of Arizona Instrument, Motec and Soundcom are aiding growth of its Electronic Instruments segment while the FMH Aerospace integration is driving sales in the Electromechanical unit.

In the quarter under review, the company completed its buyout transactions of Spectro Scientific, Telular Corporation and Forza Silicon Corporation, which are expected to strengthen its business further.

Moreover, AMETEK is also gaining from broad-based growth across geographies. We expect its expanding product portfolio to consistently boost its performance across all geographical regions.

On the last earnings call, management mentioned that the company witnessed no slowdown in the Chinese semiconductor market and the same is expected in the soon-to-be-reported quarter as well.

In fact, the company witnessed 12% year-over-year growth in Asia during the earlier reported quarter, backed by solid growth in China. Management mentioned that the company is striving hard to improve production efficiencies in the semiconductor market, nuclear instrumentation market and the advanced process market, which is leading to positive demand.

However, the overall trade situation makes us apprehensive about the company’s near-term performance. Besides, adverse foreign exchange translation is a major headwind.

What Our Model Says

Our proven Zacks model confirms that a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has a good chance of beating estimates if it also has a positive Earnings ESP. Zacks Rank #4 (Sell) or 5 (Strong Sell) stocks are best avoided. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

AMETEK has a Zacks Rank #3 but an Earnings ESP of -1.19%. Although its solid Zacks Rank increases the predictive power of ESP, its negative ESP leaves surprise prediction inconclusive as the company also needs to have a positive ESP to be confident about a likely earnings surprise.

Stocks to Consider

Here are some stocks that you may consider as our model shows that these have the right combination of elements to beat on earnings in the upcoming releases:

Twitter, Inc. TWTR has an Earnings ESP of +13.03% and a Zacks Rank of 1. You can see the complete list of today’s Zacks #1 Rank stocks here.

GTT Communications, Inc. GTT has an Earnings ESP of +173.53% and a Zacks Rank #2.

Lumentum Holdings Inc. LITE has an Earnings ESP of +1.10% and a Zacks Rank of 2.

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