Colfax (CFX) Stock Up 19.3% YTD: What's Driving the Rally?
Colfax Corporation’s CFX performance has been impressive since the beginning of this year, which is evident from a 19.3% increase in its share price. Strong demand for its products, solid product offerings, buyouts and an impressive cash flow supported positive market sentiments for the company.
The Fulton, MD-based company, with $6.2 billion of market capitalization, belongs to the Zacks Manufacturing - General Industrial industry. The company currently carries a Zacks Rank #2 (Buy).
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Year to date, Colfax has outperformed its industry’s growth of 7.8% and the S&P 500’s rally of 17.5%.
Factors Favoring the Stock
Colfax is poised to benefit from its focus on product innovation, a solid business portfolio and rising customer demand. The company anticipates witnessing healthy year-over-year increase in sales and earnings in 2021, along with an impressive cash flow. Its ability to generate healthy cash flows allows it to effectively deploy capital for acquisitions and improving organic growth capabilities. Free cash flow is anticipated to be at least $250 million for 2021.
Colfax is focused on strengthening its businesses through the addition of assets. The company’s buyout of LiteCure (December 2020) created strong growth opportunities in the physical therapy and rehabilitation market. Also, its buyout of Trilliant Surgical (January 2021) is likely to enable its DJO Global business to offer comprehensive foot and ankle solutions. Its MedShape buyout (April 2021) is also anticipated to boost its growth opportunities in the reconstructive business. Acquisitions had a positive impact of 1.8% on sales in first-quarter 2021.
Launch of new products like Motion iQ, EMPOWR Partial Knee and AltiVate Anatomic CS Edge, along with the company’s cost control measures, might also be beneficial. In 2020, cost savings of more than $20 million were realized from its restructuring activities, with additional savings of $25-$30 million expected in 2021.
This apart, its focus on improving operational productivity and innovation investments will likely drive its performance in the quarters ahead.
The Zacks Consensus Estimate for Colfax’s earnings is pegged at $2.14 for 2021, up 0.5% from the 60-day-ago figure. The consensus estimate for second-quarter 2021 earnings stands at 53 cents, having moved 1.9% north over the same time frame.
Other Stocks to Consider
Some other top-ranked stocks from the same space are Chart Industries, Inc. GTLS, Helios Technologies, Inc HLIO and Graco Inc. GGG, each carrying a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Chart delivered an earnings surprise of 28.92%, on average, in the trailing four quarters.
Helios delivered an earnings surprise of 50.69%, on average, in the trailing four quarters.
Graco delivered an earnings surprise of 28.28%, on average, in the trailing four quarters.
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