Huntington Ingalls (HII) Q3 Earnings Top, Revenues Up Y/Y
IDEX Corporation IEX kept its earnings streak alive in the third quarter of 2018. It delivered positive earnings surprise of 7.6% in the quarter.
The company’s adjusted earnings per share in the reported quarter were $1.41, surpassing the Zacks Consensus Estimate of $1.31. The bottom line excluded 6 cents per share of restructuring expenses and 2 cents of related tax benefits.
Further, the bottom line increased 30.6% from the year-ago tally of $1.08. The improvement was driven by healthy organic growth, diligent execution of productivity initiatives and lower taxes.
Segmental Performance Drives Revenues
In the reported quarter, IDEX generated revenues of $622.9 million. The top line increased 8.4% year over year on the back of 9% growth in organic sales. Forex woes had an adverse 1% impact. Moreover, the top line surpassed the Zacks Consensus Estimate of $615.5 million by 1.2%.
In the quarter under review, orders increased 7% year over year to $615.1 million. As noted, orders improved 8% organically and foreign currency movements had an adverse 1% impact.
IDEX reports its revenues under the segments discussed below:
Net sales of Fluid & Metering Technologies (“FMT”) were $239.2 million, up 8.3% year over year. Organic net sales in the reported quarter grew 12% while forex headwinds and acquisitions/divestitures had 3% and 1% negative impacts, respectively.
Revenues from Health & Science Technologies (“HST”) totaled $222.4 million, reflecting year-over-year growth of 7.4%. Results were driven by 6% organic sales growth and 2% gain from acquisitions, partially offset by forex woes of 1%.
Fire & Safety/Diversified Products (“FSDP”) revenues were $161.8 million, up 10.4% from the year-ago quarter. Organic sales growth of 11% was partially offset by 1% negative impact from foreign currency translation.
In the reported quarter, IDEX’s cost of sales increased 8.2% year over year to $342.7 million. It represented 55% of the quarter’s revenues compared with 55.1% in the year-ago quarter. Gross margin improved 10 basis points (bps) year over year to 45% on the back of benefits from higher volumes and productivity actions.
However, rise in engineering costs was a headwind. Selling, general and administrative expenses decreased roughly 0.7% to $130.5 million. It represented 20.9% of revenues compared with 22.9% in the year-ago quarter.
Adjusted operating income increased 18.4% year over year to $149.8 million and margin improved 200 bps to 24%. On a segmental basis, adjusted operating income for FMT segment increased 13.96% to $70.6 million, while that for HST expanded 13.4% to $52.3 million and for FSDP grew 23.7% to $44.8 million.
Effective tax rate in the reported quarter was 20.2% versus 26.4% in the previous-year quarter.
Balance Sheet and Cash Flow
Exiting the third quarter, IDEX had cash and cash equivalents of $491.8 million, up 7.2% from $458.8 million recorded at the end of the last reported quarter. Long-term borrowings declined 1.2% to $848.2 million.
In the quarter under review, the company generated net cash of $325.8 million from operating activities, reflecting growth of 9.8% from the year-ago quarter. Capital spending on purchase of property, plant and equipment was roughly $39.9 million, up 42.1% from $28.1 million in the year-ago comparable period. Free cash flow was $285.9 million, up 6.5% year over year.
During the nine months, the company bought back shares worth $50.7 million and distributed dividends totaling $94.9 million. It’s worth mentioning here that IDEX repurchased $31 million worth of shares in the third quarter.
With solid results in the first nine months and continued strength in businesses, IDEX raised its guidance for 2018. Full-year adjusted earnings are currently anticipated to be $5.35-$5.37 per share compared with $5.27-$5.35 stated earlier. Organic revenue growth is anticipated to be roughly 8%, up from 7% mentioned earlier.
For the fourth quarter, earnings per share are anticipated to be $1.25-$1.27 on the back of organic revenue growth of 5-6%.
IDEX Corporation Price, Consensus and EPS Surprise
IDEX Corporation Price, Consensus and EPS Surprise | IDEX Corporation Quote
Zacks Rank & Key Picks
With a market capitalization of approximately $9.9 billion, IDEX currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the industry are Altra Industrial Motion Corp. AIMC, Dover Corporation DOV and Kadant Inc. KAI. While Altra Industrial sports a Zacks Rank #1 (Strong Buy), both Dover and Kadant 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 Altra Industrial and Dover improved for the current year while remained stable for Kadant. Further, average positive earnings surprise in the last four quarters was 4.01% for Altra Industrial, 6.04% for Dover and 13.95% for Kadant.
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