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IDEX (IEX) Q1 Earnings Top Estimates, Revenues Increase

Zacks Equity Research

IDEX Corporation IEX reported better-than-expected results for the first quarter of 2019. It pulled off a positive earnings surprise of 5.11%.

The company’s adjusted earnings per share were $1.44, surpassing the Zacks Consensus Estimate of $1.37.

Further, the bottom line increased 12% from the year-ago quarter figure of $1.29. The improvement was driven by healthy organic growth and diligent execution of productivity initiatives.

IDEX Corporation Price, Consensus and EPS Surprise

IDEX Corporation Price, Consensus and EPS Surprise | IDEX Corporation Quote

IDEX generated revenues of $622.2 million in the quarter under review, reflecting year-over-year growth of 2%. The top-line improvement came on the back of 4% growth in organic sales, partially offset by 2% adverse impact of forex woes.

However, the top line lagged the consensus estimate of $635 million by 2%.

In the first quarter, orders increased 4% year over year to $655.5 million. As noted, organically orders improved 6%, acquisitions had positive impact of 1% and foreign currency movements had an adverse 3% impact.

IDEX reports revenues under the segments discussed below:

Net sales of Fluid & Metering Technologies (“FMT”) were $242.5 million, up 4% year over year. Organic net sales grew 6% while forex headwinds had 2% impact.

Revenues from Health & Science Technologies (“HST”) totaled $225.3 million, reflecting year-over-year growth of 2%. Results were driven by 3% organic sales growth and 1% gain from acquisitions, partially offset by forex woes of 2%.

Fire & Safety/Diversified Products (“FSDP”) revenues were $156.2 million, down 2% from the year-ago quarter. Organic sales improved 1% while currency translation had adverse 3% impact.

Margin Details

In the reported quarter, IDEX’s cost of sales increased 0.8% year over year to $338.4 million. It represented 55.4% of the quarter’s revenues compared with 54.8% in the year-ago quarter. Gross margin improved 40 basis points (bps) to 45.6% on the back of benefits from higher volumes, pricing and productivity actions. However, rise in engineering costs played spoilsport. Selling, general and administrative expenses decreased marginally to $136.5 million. It represented 21.9% of revenues compared with 22.5% a year ago.

Adjusted operating income increased 8.1% to $147.8 million, and margin improved 120 bps to 23.8%. On a segmental basis, adjusted operating income for the FMT segment increased 8.4% to $71.9 million and that for HST expanded 2.5% to $54.2 million while for FSDP it increased 1.5% to $40.3 million. Adjusted effective tax rate in the reported quarter was 19.5%.

Balance Sheet and Cash Flow

Exiting the first quarter, IDEX had cash and cash equivalents of $456.1 million, down 2.3% from $466.4 million recorded at the end of the last reported quarter. Long-term borrowings were flat sequentially at $848.4 million.

In the first quarter, the company generated net cash of $88.7 million from operating activities, reflecting growth of 23.7% from the year-ago quarter. Free cash flow was $75.8 million, up 23%.

Outlook

For 2019, adjusted earnings are anticipated to be $5.70-$5.85, higher than $5.60-$5.80 per share guided earlier. Organic revenue growth is estimated to be roughly 4-5%.

For the second quarter, earnings per share are expected to be $1.47-$1.50.

Zacks Rank & Key Picks

IDEX currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the same space are DXP Enterprises, Inc. DXPE, Actuant Corporation ATU and Cintas Corporation CTAS. While DXP Enterprises sports a Zacks Rank #1 (Strong Buy), Actuant and Cintas carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

DXP Enterprises delivered average earnings surprise of 46.55% in the trailing four quarters.

Actuant pulled off average positive earnings surprise of 11.01% in the trailing four quarters.

Cintas outpaced estimates in the last reported quarter by 6.09%.

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