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IDEX (IEX) Q4 Earnings Top Estimates, Up Y/Y on Higher Sales

Zacks Equity Research

IDEX Corporation IEX reported better-than-expected results for the fourth quarter of 2018. It pulled off a positive earnings surprise of 3.14%.

The company’s adjusted earnings per share in the reported quarter were $1.31, surpassing the Zacks Consensus Estimate of $1.27. The bottom line excludes 5 cents per share of restructuring expenses and 1 cent of related tax benefits.

Further, the bottom line increased 17% from the year-ago quarter’s figure of $1.12. The improvement was driven by healthy organic growth and diligent execution of productivity initiatives.

For 2018, the company’s adjusted earnings per share were $5.41, surpassing the Zacks Consensus Estimate of $5.37 and up 26% from the year-ago tally of $4.31.

Organic Growth Drives Revenues

IDEX generated revenues of $614.1 million in the quarter under review, reflecting year-over-year growth of 4.8%. The top-line improvement came on the back of 5% growth in organic sales and 1% benefit from acquisitions/divestitures, partially offset by 1% adverse impact of forex woes.

However, the top line lagged the Zacks Consensus Estimate of $618.1 million by 0.6%.

In the reported quarter, orders increased 1% year over year to $610.3 million. As noted, organically orders improved 2% and foreign currency movements had an adverse 1% impact.

IDEX reports revenues under the segments discussed below:

Net sales of Fluid & Metering Technologies (“FMT”) were $237.2 million, up 6.8% year over year. Organic net sales grew 8% while forex headwinds had 1% impact.

Revenues from Health & Science Technologies (“HST”) totaled $225.5 million, reflecting year-over-year growth of 7.9%. Results were driven by 7% organic sales growth and 2% gain from acquisitions, partially offset by forex woes of 1%.

Fire & Safety/Diversified Products (“FSDP”) revenues were $151.7 million, down 2.4% from the year-ago quarter. Organic sales declined 1% and currency translation had adverse 1% impact.

For 2018, IDEX’s revenues increased 8.6% year over year to $2,483.7 million. However, the top line lagged the Zacks Consensus Estimate of $2.49 billion. Demand in industrial markets was healthy during the year.

Margins Improve

In the reported quarter, IDEX’s cost of sales increased 4.7% year over year to $340.5 million. It represented 55.4% of the quarter’s revenues compared with 55.5% in the year-ago quarter. Gross margin improved 10 basis points (bps) year over year to 44.6% on the back of benefits from higher volumes and productivity actions. However, rise in engineering costs played spoilsport. Selling, general and administrative expenses decreased roughly 0.7% to $130.4 million. It represented 21.2% of revenues compared with 22.4% in the year-ago quarter.

Adjusted operating income in the quarter increased 10.5% year over year to $143.3 million and margin improved 120 bps to 23.3%. On a segmental basis, adjusted operating income for the FMT segment increased 9.6% to $69.1 million and that for HST expanded 13.2% to $52.8 million while for FSDP it decreased 2.4% to $40.2 million. Adjusted effective tax rate in the reported quarter was 23.9%.

Balance Sheet and Cash Flow

Exiting the fourth quarter, IDEX had cash and cash equivalents of $466.4 million, down 5.2% from $491.8 million recorded at the end of the last reported quarter. Long-term borrowings were flat sequentially at $848.3 million.

In the year, the company generated net cash of $479.3 million from operating activities, reflecting growth of 10.8% from the previous year. Capital spending on the purchase of property, plant and equipment was roughly $56.1 million, up 27.9% from $43.9 million in 2017. Free cash flow was $137.4 million, up 14% year over year.

During the year, the company bought back 1.3 million shares worth $173.9 million and distributed dividends totaling $127.5 million. It is worth mentioning here that the company repurchased 917,000 shares for $122 million in the fourth quarter.

Outlook

For 2019, IDEX anticipates gaining from the diversified business structure and product portfolio as well as growth investments and solid execution abilities. However, the company expressed concerns about geopolitical uncertainties and prevalent trade issues.

Full-year adjusted earnings are anticipated to be $5.60-$5.80 per share. The projection includes adverse impact of 15 cents forex woes. Organic revenue growth is anticipated to be roughly 4-5%.

For the first quarter, earnings per share are anticipated to be $1.35-$1.38, including forex headwinds of 6 cents.

IDEX Corporation Price, Consensus and EPS Surprise

 

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

Zacks Rank & Stocks to Consider

With a market capitalization of approximately $10.4 billion, IDEX currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the industry are DXP Enterprises, Inc. DXPE, Twin Disc, Incorporated TWIN and Colfax Corporation CFX. While DXP Enterprises currently sports a Zacks Rank #1 (Strong Buy), Twin Disc and Colfax carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Earnings estimates for DXP Enterprises and Colfax for 2019, and that for Twin Disc for fiscal 2019 (ending June 2019) have improved over the past 60 days. Positive earnings surprise for the last four quarters was 112.62% for DXP Enterprises, 220.64% for Twin Disc and 8.88% for Colfax.

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