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Mettler-Toledo (MTD) Down 12.9% Since Last Earnings Report: Can It Rebound?

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Zacks Equity Research
·4 min read
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It has been about a month since the last earnings report for Mettler-Toledo (MTD). Shares have lost about 12.9% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Mettler-Toledo due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Mettler-Toledo Q4 Earnings & Revenues Beat Estimates

Mettler-Toledo International reported four-quarter 2020 adjusted earnings of $9.26 per share, which beat the Zacks Consensus Estimate by 6.2%. The bottom line also improved 19% on a year-over-year basis and 31.9% sequentially.

Net sales of $937.9 million were up 11% on a reported basis and 7% on a currency-neutral basis from the respective year-ago quarter levels. Further, the top line rose 16.2% from the prior quarter. Also, the same surpassed the Zacks Consensus Estimate of $903.9 million.

Strong performance delivered by the company across all geographies, especially in China, remained a major positive. Further, growing momentum across the Laboratory and Food Retail segments in the reported quarter drove top-line growth.

Additionally, solid customer demand along with proper execution and cost-control strategies contributed well.

However, headwinds related to the coronavirus continued to impact the company negatively. Moreover, uncertainties due to the ongoing pandemic are likely to linger in the near term.

Nevertheless, the company’s portfolio strength, cost-cutting efforts, margin and productivity initiatives, and robust sales and marketing strategies are expected to remain tailwinds amid the COVID-related uncertainties.

Top Line in Detail

By Segments: The company reports under three segments, namely Laboratory Instruments, Industrial Instruments and Food Retail, which accounted for 56%, 38% and 6% of the net sales in the fourth quarter, respectively. Further, the Laboratory, Industrial and Food Retail segments witnessed year-over-year growth of 12%, 1% and 7%, respectively, in the quarter under review.

By Geography: The company reports total sales from the Americas, Europe and Asia/Rest of the World. All these regions contributed 36%, 32% and 32% to the net sales in the fourth quarter, respectively. Further, sales in Americas, Europe and Asia/Rest of the World went up 8%, 7% and 8%, respectively, on a year-over-year basis.

Operating Results

Gross margin was 59.6%, expanding 60 bps year over year.

Research & development (R&D) expenses were $39.9 million, up 12.9% from the year-ago quarter. Selling, general & administrative (SG&A) expenses increased 9.5% year over year to $226.4 million.

As a percentage of sales, R&D expenses expanded 10 bps year over year to 4.3%. Further, SG&A expenses contracted 40 bps year over year to 24.1%.

Adjusted operating margin was 31.2%, which expanded 80 bps from the prior-year quarter.

Balance Sheet & Cash Flow

As of Dec 31, 2020, the company’s cash and cash equivalent balance was $95.2 million, down from $153.7 million on Sep 30, 2020.

Long-term debt was $1.3 billion at the end of the fourth quarter, increasing from $1.2 billion at the end of the third quarter.

Mettler-Toledo generated $250.9 million of cash from operating activities in the reported quarter, up from $225.1 million in the previous quarter. Free cash flow was $218.1 million in the reported quarter.

Guidance

For first-quarter 2021, Mettler-Toledo anticipates sales growth between 11% and 13% on a year-over-year basis in local currency.

Adjusted first-quarter earnings are anticipated to be $5.55-$5.70 per share, implying a 39 rise from the year-ago quarter’s reported figure.

For 2021, the company anticipates year-over-year sales growth of 5 in local currency.

Adjusted 2021 earnings are anticipated to be $29.20-$29.80 per share.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates revision. The consensus estimate has shifted -5.89% due to these changes.

VGM Scores

Currently, Mettler-Toledo has a strong Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. However, the stock was allocated a grade of F on the value side, putting it in the bottom 20% quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. Notably, Mettler-Toledo has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.


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