Fire & Safety Products Unit Aids IDEX (IEX) Amid Cost Woes
IDEX Corporation IEX is poised to gain from the strong performance of the Fire & Safety/Diversified Products (FSD) segment, driven by strong momentum in the fire and rescue businesses. Segmental adjusted EBITDA margin increased 210 bps due to strong price cost performance, operational productivity and favorable volume leverage in the third quarter of 2023.
The company is steadily strengthening its business through acquisitions. In October 2023, the company inked a deal to acquire advanced material science solutions provider, STC Material Solutions, for a cash consideration of $206 million. This acquisition will expand the company’s growing expertise in material sciences and offer significant opportunities to collaborate with other IDEX critical components businesses on comprehensive solution sets for customers. The buyout is expected to be completed by late 2023, subject to regulatory approvals.
The acquisition of Iridian Spectral (May 2023) expanded IDEX’s wide array of optical technology offerings. Iridian is part of IDEX Optical Technologies within the Health & Science Technology segment. Acquired assets boosted the company’s sales by 3% in the third quarter of 2023. The company anticipates buyout synergies to boost sales by 2% in the fourth quarter and 4% in 2023.
IDEX continues to increase shareholders’ value through dividend payments and share buybacks. The company’s dividend payments totaled $142.3 million (up 7.6% year over year) in the first nine months of 2023. The current quarterly dividend rate is 64 cents per share (a hike of 7% was announced in May 2023).
However, weakness in the Health & Science Technologies segment due to softness in the life sciences, analytical instrumentation, semiconductor, and industrial end markets raises concerns for the company. In the third quarter, the segmental adjusted EBITDA margin was down 420 bps year over year due to unfavorable volume leverage and mix, and soaring employee-related costs.
A slowdown in the industrial businesses and continued customer destocking in the agriculture business are ailing the FMT segment. Also, the material processing technology business is experiencing softness due to lower demand in the pharma/biopharma and food/nutrition end markets.
Escalating costs and expenses have been a concern for IDEX over time. The cost of sales increased 6.6% year over year in the first nine months of 2023 due to increasing raw material costs. Selling, general and administrative expenses grew 9.6% year over year in the same period due to higher employee-related costs.
In the past year, shares of this current Zacks Rank #3 (Hold) company have lost 9.8% against the industry’s 14.3% increase.
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Flowserve Corporation (FLS) : Free Stock Analysis Report
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