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A month has gone by since the last earnings report for IDEX Corporation IEX. Shares have added about 1.5% in that time frame.
Will the recent positive trend continue leading up to its next earnings release, or is IEX 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.
IDEX Q1 Earnings Beat on Firm Organic Growth, View Up
IDEX reported strong first-quarter 2018 results with all-time high revenues, operating income and earnings driven by healthy organic growth and diligent execution of operational plans. GAAP earnings for the reported quarter were $99 million or $1.27 per share compared with $75.9 million or 99 cents per share in the year-earlier quarter. The year-over-year improvement was primarily attributable to top-line growth. Excluding restructuring and other non-recurring items, adjusted earnings for the reported quarter were $1.29 per share, which beat the Zacks Consensus Estimate of $1.24.
Net sales in the reported quarter came in at $612.3 million compared with $553.6 million in the year-ago quarter. Quarterly sales exceeded the Zacks Consensus Estimate of $601 million. The top-line increase was primarily attributable to organic growth of 7%. Investments in product innovations, business development and reallocation of resources led to growth in revenues across all segments of the company, which helped drive total revenues.
Net sales of Fluid & Metering Technologies (FMT) were $232.3 million compared with $216.8 million in the prior-year quarter primarily led by organic growth of 5% in the quarter. The company recorded impressive performance in its pump business with double-digit increase in both orders and sales year over year owing to improved oil prices.
Aggregate quarterly revenues from Health & Science Technologies (HST) came in at $221.1 million compared with $199.7 million in the year-ago quarter, driven by organic growth of 8% and solid IVD/BIO end markets.
Fire & Safety/Diversified Products (FSDP) revenues were $159.2 million, up from $137.4 million in the year-ago quarter with organic growth of 12%, new product launches and program wins.
Adjusted operating income for the reported quarter was $138.3 million compared with $120.5 million in the year-ago period with respective margins of 22.6% and 21.8%. The increase in adjusted operating income, despite rise in operating expenses, was primarily due to significant top-line growth. Adjusted EBITDA (earnings before interest, taxes depreciation and amortization) was $163.8 million with adjusted EBITDA margin of 26.8% compared with $141.5 million and 25.6%, respectively, in the year-ago period.
Adjusted operating income for FMT increased to $66.3 million from $59.4 million with respective margins of 28.5% and 27.4% on robust performance in industrial valve business in China and healthy pump sales.
Adjusted operating income of HST was $52.9 million compared with $45.3 million for respective margins of 23.9% and 22.7% on higher volume and productivity initiatives.
Adjusted operating profit of FSDP increased to $39.7 million from $32.7 million for margins of 24.9% and 23.8%, respectively, with solid project activities and strength in OEM business.
Balance Sheet and Cash Flow
IDEX exited the quarter with cash and cash equivalents of $413 million and long-term debt of $859.7 million. For the first three months of 2018, the company generated net cash of $71.7 million from its operating activities, down from $85 million recorded in the prior-year period. Free cash flow for the quarter was $61.7 million, down 18% owing to higher operating working capital.
IDEX is poised to gain from robust organic growth, disciplined capital deployment and a favorable global macroeconomic environment. With solid quarterly results and continued strength in order trajectory, management has increased its earlier guidance for 2018. Full-year adjusted earnings are currently anticipated to lie within the $5.05-$5.20 per share range, up from $4.90-$5.10 expected earlier on organic growth of 5-6%.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates. There have been six revisions higher for the current quarter.
IDEX Corporation Price and Consensus
IDEX Corporation Price and Consensus | IDEX Corporation Quote
At this time, IEX has an average Growth Score of C, though it is lagging a bit on the momentum front with a D. The stock was also allocated a grade of D on the value side, putting it in the bottom 40% 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.
The company's stock is suitable solely for growth based on our styles scores.
Estimates have been trending upward for the stock and the magnitude of these revisions looks promising. It comes with little surprise IEX has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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