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IDEX (IEX) Q2 Earnings and Revenues Lag Estimates, Up Y/Y

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IDEX Corporation IEX 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.

Revenue Details

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.

Margin Profile

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.

Acquisitions

In the second quarter of 2021, IDEX used $469.3 million for acquiring businesses against no acquisition expenses in the year-ago quarter.

In June 2021, IDEX completed the acquisition of Rutherford, NJ-based Airtech Group, Inc. along with the US Valve Corporation and other entities. The other party to the transaction, with the cash consideration of $469.3 million, was an investment fund handled by EagleTree Capital.

Airtech specializes in making compressor systems, vacuum pumps, valves and regenerative blowers. The products are widely used in transportation, food processing, packaging and alternative energy markets. The firm has operations in the United States, Asia and Europe.

IDEX will benefit from the buyout of Airtech as the latter is anticipated to boost its offerings of air moving technologies. IDEX has integrated Airtech’s businesses with its Health & Science Technology segment.

Outlook

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.

IDEX Corporation Price, Consensus and EPS Surprise

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

IDEX Corporation price-consensus-eps-surprise-chart | IDEX Corporation Quote

Zacks Rank & Stocks to Consider

The company currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks are Carlisle Companies Incorporated CSL, Griffon Corporation GFF and ITT Inc. ITT, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Carlisle delivered an earnings surprise of 39.38%, on average, in the trailing four quarters.

Griffon delivered an earnings surprise of 122.71%, on average, in the trailing four quarters.

ITT delivered an earnings surprise of 26.36%, on average, in the trailing four quarters.


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