It has been about a month since the last earnings report for Idex (IEX). Shares have added about 3.1% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Idex due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
IDEX Q2 Earnings and Revenues Lag Estimates, Up Y/Y
IDEX reported weaker-than-expected results for the second quarter of 2021. Its earnings missed estimates by 0.6% and sales lagged the same by 0.3%.
The company’s adjusted earnings in the reported quarter were $1.61 per share, missing the consensus estimate of $1.62. The bottom line, however, grew 46.4% from the year-ago figure of $1.10 on the back of sales growth.
In the quarter under review, IDEX’s net sales were $685.9 million, reflecting year-over-year growth of 22.2%. The top line gained from contributions of 1% from acquired assets, 4% from foreign-currency translation and 17% from organic sales.
The company’s revenues lagged the Zacks Consensus Estimate of $688 million.
Orders in the quarter totaled $751 million, reflecting year-over-year growth of 44%. Organically, orders increased 39%, and acquired assets and foreign-currency translation positively impacted orders by 1% and 4%, respectively.
The company currently reports under three business segments, results of which are discussed below:
Revenues from Fluid & Metering Technologies totaled $251.3 million, increasing 14.7% year over year. Organic sales were up 8%, and acquisitions and foreign currency translation added 4% and 3%, respectively.
Revenues from Health & Science Technologies totaled $275 million, reflecting year-over-year growth of 27.5%. Organic sales in the quarter increased 25% year over year and foreign-currency translation had a positive impact of 4%. However, divestiture had a negative impact of 1% on sales.
Revenues from Fire & Safety/Diversified Products totaled $160.8 million, rising 26.5% year over year. The results were positively impacted by a 22% increase in organic sales and a 5% gain from foreign-currency translation.
In the second quarter, IDEX’s cost of sales increased 16.4% year over year to $379.9 million. Adjusted gross profit was $307.9 million, up 28.9%, while adjusted gross margin increased 230 basis points (bps) to 44.9%.
Selling, general and administrative expenses increased 20.2% year over year to $144.7 million.
It represented 21.1% of revenues. Adjusted earnings before interest, tax, depreciation and amortization (EBITDA) in the quarter under review increased 36.5% to $192.6 million. Also, adjusted EBITDA margin grew 300 bps year over year to 28.1%.
Adjusted operating income was $167.1 million, up 41% year over year, whereas margin was at 24.4%, up 330 bps. Interest expenses in the quarter dipped 9.7% to $11.2 million.
Balance Sheet and Cash Flow
Exiting the second quarter, IDEX’s cash and cash equivalents decreased 25.4% sequentially to $714.4 million. Further, long-term debt of $1,189.8 million was up 13.9% on a sequential basis.
In the first six months of 2021, IDEX generated net cash of $245.6 million from operating activities, decreasing 3.4% from the prior-year period. Capital used for purchasing property, plant and equipment was $30.6 million versus $21.1 million in the first six months of 2020. Free cash flow was $215 million, down 7.8% year over year.
In the quarter, the company paid out dividends totaling $41 million and refrained from repurchasing any shares. It distributed $37.8 million as dividends and bought back shares worth $1.4 million in the year-ago quarter.
In the second quarter of 2021, IDEX used $469.3 million for acquiring businesses against no acquisition expenses in the year-ago quarter.
Driven by strong orders, record backlog and incremental pricing actions, IDEX has raised projections for 2021. It now anticipates organic revenue growth of 11-12% for the year compared with an increase of 9-10% mentioned earlier. Organic sales in the third quarter are expected to grow 14-16%.
Earnings are predicted to be $1.57-$1.61 for the third quarter and $6.26-$6.36 for 2021. The year’s projection reflects improvement from $6.05-$6.20 mentioned earlier.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates revision. The consensus estimate has shifted 6.42% due to these changes.
At this time, Idex has an average Growth Score of C, a grade with the same score on the momentum front. However, the stock was allocated a grade of F on the value side, putting it in the fifth quintile 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.
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Idex has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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