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IDEX (IEX) Shares Up 31% YTD: What's Driving the Rally?

Zacks Equity Research

Shares of IDEX Corporation IEX have rallied about 31% so far this year. Also, the company has significantly outperformed its industry’s rise of 20.5% over the same time frame.

The Zacks Rank #3 (Hold) stock, which has a market cap of roughly $12.3 billion, has impressed investors with its recent earnings streak. It surpassed estimates all through in the four trailing quarters, the average positive surprise being 4.14%.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Let’s analyze the reasons behind the company’s impressive price performance and find out if there is room for further appreciation:

Growth Drivers

IDEX has been gaining from its solid product portfolio, diligent execution of productivity initiatives and growth investments. Over time, the company has solidified the product portfolio and leveraged business opportunities through acquisition of assets. In this regard, the acquisition of the intellectual property assets of Phantom Controls (in June 2018) has been augmenting the company's water-flow offerings under Akron Brass, Hale Products and other Class 1 Electronics brands. Also, the Finger Lakes Instrumentation buyout (in July 2018) has been solidifying IDEX's Health & Science business. In addition, the company’s buyout of Velcora Holding AB (in July 2019), and its Steridose and Roplan businesses, will help it in enhancing the sealing solutions platform.

Also, IDEX is witnessing robust demand environment across major life science markets. Notably, solid original equipment manufacturers demand along with a favorable chemical market is likely to drive the company’s top-line performance. In addition, strength in Viking and Richter businesses, and strong momentum across fire and safety businesses are likely to boost revenues of the company. For 2019, the company anticipates overall revenues to increase 3-4 % year over year, on an organic basis.

Estimate Revisions

The Zacks Consensus Estimate for 2019 earnings for IDEX has climbed nearly 0.2% over the past 60 days from $5.82 to $5.83. For the year, four estimates have been being revised upward in the past couple of months.

Upbeat Q2 Performance

IDEX reported adjusted earnings per share of $1.50 in second-quarter 2019, marking a 7.1% year-over-year rise. Moreover, the figure beat the Zacks Consensus Estimate by 0.67%. This earnings improvement is primarily attributable to healthy organic growth. The company expects to gain from a diversified business structure, solid product portfolio, execution abilities and growth investments. It predicts adjusted earnings per share of $5.78-$5.85 for 2019, higher than $5.70-$5.85 predicted earlier. For the third quarter, earnings are projected to be $1.45-$1.47, indicating a rise from $1.41 reported in the year-ago quarter.

Notably, IDEX has been able to significantly outperform its peers such as DXP Enterprises, Inc. DXPE, Flowserve Corporation FLS and Parker-Hannifin Corporation PH, which have gained 16.6%, 12.2% and 11.1%, respectively, year to date.

The Hottest Tech Mega-Trend of All

Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.

See Zacks' 3 Best Stocks to Play This Trend >>

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