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Colfax (CFX) Beats Q1 Earnings Estimates, Increases View

Colfax Corporation CFX delivered impressive results for first-quarter 2021. Its earnings in the quarter surpassed estimates by 12.82%, whereas sales beat the same by 4.49%. This was the company’s 22nd consecutive quarter of impressive bottom-line results.

The machinery company’s adjusted earnings in the reported quarter were 44 cents per share, surpassing the consensus estimate of 39 cents. Also, the bottom line increased 15.8% from the year-ago figure of 38 cents on improved sales and margin generation.

Revenue Details

In the quarter under review, Colfax’s net sales were $879.2 million, reflecting year-over-year growth of 7.7%. The results benefitted from 4.2% growth in the existing businesses and a 1.7% positive impact from movements in foreign currencies. Also, acquisitions boosted sales by 1.8% in the quarter.

Also, the company’s revenues surpassed the Zacks Consensus Estimate of $841 million.

It currently reports under two business segments — Fabrication Technology and Medical Technology. The segmental information is briefly discussed below:

Revenues from Fabrication Technology totaled $568.1 million, rising 8.1% year over year. The results gained from 6.6% growth in existing businesses and a 1.4% contribution from foreign currency translation. Also, acquisitions boosted sales by 0.1% in the quarter.

Revenues from Medical Technology totaled $311.1 million, reflecting year-over-year growth of 7%. The results gained from 4.8% contribution from acquisitions and 2.3% from foreign currency translation. However, existing businesses recorded a fall of 0.2% in the quarter.

Margin Profile

In the quarter under review, Colfax’s cost of sales increased 8.5% year over year to $508.1 million. Selling, general and administrative expenses expanded 4.6% year over year to $305.7 million. It represented 34.8% of revenues.

Adjusted earnings before interest, tax and amortization (EBITA) in the quarter under review increased 12.1% year over year to $107.1 million. Also, the adjusted EBITA margin grew 0.5 percentage points year over year to 12.2%. Interest expenses in the quarter grew 3.5% year over year to $25.7 million. Adjusted tax rate in the quarter was 22%.

Balance Sheet and Cash Flow

Exiting the first quarter, Colfax had cash and cash equivalents of $763.7 million, up significantly from $97.1 million in the previous quarter. Its long-term debt balance was down 32.8% sequentially to $1,482 million.

Notably, the company repaid borrowings of $185.6 million under its revolving credit facilities and others in the quarter. Further, it raised $179.4 million in cash through the same means.

In the quarter, Colfax generated net cash of $84.4 million from operating activities as compared with $56.2 million in the year-ago quarter. Capital used for purchasing property, plant and equipment was $24.5 million, reflecting a year-over-year decline of 21.1%.

Important Events

In the first quarter of 2021, Colfax announced its plan to split up its fabrication technology and medical technology businesses into two separate companies. Notably, the separation, which is expected to close in the first quarter of 2022, is planned to be carried out following a tax-free method.

Colfax believes that the separation will unlock significant values for each of its businesses, enabling them to deliver high growth, strong free cash flow and margin expansion. Notably, with the separation, both businesses are anticipated to operate with unique business models, enhanced operating flexibility and sound capital-deployment strategies. The fabrication technology company’s headquarter will remain in Maryland, while the medical technology company will be based in Wilmington, DE.

In April, Colfax acquired MedShape, Inc. The latter specializes in providing solutions for ankle and foot surgeons. The buyout is predicted to strengthen Colfax’s MedTech reconstructive business.

Outlook

For 2021, Colfax anticipates adjusted earnings per share of $2.05-$2.15, up from $2.00-$2.15 per share mentioned earlier. Free cash flow is likely to be $250 million for the year.

For the second quarter of 2021, adjusted earnings per share are predicted to be 48-53 cents per share.

Colfax Corporation Price, Consensus and EPS Surprise

Colfax Corporation Price, Consensus and EPS Surprise
Colfax Corporation Price, Consensus and EPS Surprise

Colfax Corporation price-consensus-eps-surprise-chart | Colfax Corporation Quote

Zacks Rank & Stock to Consider

With a market capitalization of $4.7 billion, the company currently carries a Zacks Rank #4 (Sell).

Three better-ranked stocks in the industry are Dover Corporation DOV, Applied Industrial Technologies, Inc. AIT and Graco Inc. GGG. While Dover currently sports a Zacks Rank #1 (Strong Buy), both Applied Industrial and Graco carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

In the past 60 days, earnings estimates for these companies improved for the current year. Further, earnings surprise for the last reported quarter was 23.13% for Dover, 28.95% for Applied Industrial and 16.00% for Graco.

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