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Mettler-Toledo (MTD) Q2 Earnings Top Estimates, Revenues Lag

Zacks Equity Research

Mettler-Toledo International, Inc. MTD delivered second-quarter 2018 adjusted earnings of $5.16 per share, beating the Zacks Consensus Estimate by 7 cents and also came ahead of management’s guided range of $5.05-$5.10 per share. The figure improved 11% on a year-over-year basis and 25.8% sequentially.

Net sales of $731.4 million were up 1.3% year over year and 7.6% from the previous quarter. In local currency, sales grew 5% from the year-ago quarter. However, the figure was below management’s growth expectation of 5.5%.

The robust performance of Laboratory and Industrial product lines drove the top line. Further, the company’s solid momentum across Americas and Asia aided growth.

However, the top line missed the Zacks Consensus Estimate of $736.34 million.

Foreign exchange headwinds had an impact of 4% on the top line during the reported quarter. Further, the company’s weak performance in Europe remained an overhang.

Nevertheless, the company remains confident on growth strategies that include productivity and margin initiatives. Moreover, Mettler-Toledo’s continued investments in product portfolio expansion, field force, Spinnaker sales and marketing programs are expected to continue aiding business growth.

Coming to the price performance, shares of Mettler-Toledo have gained 30.7% on a year-to-date basis, outperforming the industry’s rally of 21.8%.



Top Line in Detail

By Segments: The company reports in three segments — Laboratory Instruments, Industrial Instruments and Food Retail Weighing Solutions.

Laboratory Segment: This segment accounted for 52% of net sales in the reported quarter. The company witnessed sales growth of 8% in local currency on a year-over-year basis. This can be attributed to strong investments in Spinnaker sales, marketing initiatives, field resources and R&D.

Industrial Segment: The company generated 41% of net sales from this segment. Further, sales exhibited year-over-year growth of 3%. This can primarily be attributed to well performing core industrial business, which improved 5% year over year. However, the segment witnessed sluggish product inspection business, which was down 1% from the year-ago quarter.

Food Retail: Mettler-Toledo generated 7% of sales from the food retail business. However, the sales declined 8% from the prior-year quarter owing to tough market conditions and timing of customer project activity.

By Geography

The company reports total sales figure from Americas, Europe and Asia/Rest of the World.

Americas: Mettler-Toledo generated 40% of sales from this region, up 7% in local currency year over year. This was driven by well-performing industrial business, especially core industrial business. Further, robust Laboratory segment contributed to the first-quarter results. However, food retail business underperformed in this region excluding which sales would have exhibited year-over-year growth of 9%.

Europe: This region contributed 28% to the net sales of the company in the reported quarter. Sales in this region fell 1% year over year on account of sluggish performance of product inspection business excluding which sales would have improved 3% year over year. Further, softness in retail business was a headwind. These effects offset the strong performance of laboratory and core industrial businesses in this region.

Asia/Rest of the World: The company generated sales of 32% from this region, reflecting growth of 7% on a year-over-year basis. This can primarily be attributed to strong performance of the company in China where sales grew 9% from the year-ago quarter. The company experience strong momentum across all the businesses in this region during the reported quarter.

Mettler-Toledo International, Inc. Price, Consensus and EPS Surprise

 

Mettler-Toledo International, Inc. Price, Consensus and EPS Surprise

Mettler-Toledo International, Inc. price-consensus-eps-surprise-chart | Mettler-Toledo International, Inc. Quote


Operating Results

Gross margin was 57.4%, expanding 20 bps year over year, on the back of productivity and pricing.

Research & development (R&D) expenses were $36.6 million, up 3.6% from the year-ago quarter. As a percentage of revenues, the figure expanded 10 bps year over year.

Further, selling, general & administrative (SG&A) expenses decreased 1.3% year over year to $205.2 million. However, the figure contracted 70 bps from the year-ago quarter as a percentage of revenues.

Adjusted operating margin was 24.3%, expanding 90 bps from the prior-year quarter.

Balance Sheet and Cash Flow

As of Jun 30, 2019, the company’s cash and cash equivalents balance was $124.4 million, down from $126.5 million as of Mar 31, 2019.

Long-term debt was $1.1 billion, rising from $1 billion in the previous quarter.

Mettler-Toledo generated $127.1 million of cash from operating activities, up from $98.8 million in the prior quarter. Free cash flow was $113.42 million during the reported quarter.

Guidance

For third-quarter 2019, Mettler-Toledo anticipates sales growth between 4% and 5% in local currency. The Zacks Consensus Estimate for sales is pegged at $761.05 million.

Adjusted earnings are anticipated in the range of $5.65-$5.75 per share, suggesting year-over-year growth of 10-12%. The Zacks Consensus Estimate for earnings is pegged at $5.70.

For 2019, the company anticipates sales growth of 5% in local currency. The Zacks Consensus Estimate is pegged at $3.04 billion.

The company’s guidance for adjusted earnings lies in the range of $22.60-$22.75 per share. Notably, management has raised the lower end of the guidance which stood at $22.55. Further, the earnings figure is expected to indicate year-over-year improvement between 11% and 12%. The Zacks Consensus Estimate is pegged at $22.70.

Zacks Rank & Other Key Picks

Mettler-Toledo currently has a Zacks Rank #2 (Buy).

A few other better-ranked stocks in the broader technology sector are Rosetta Stone RST, Anixter International AXE and Alteryx AYX, each flaunting a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rate for Rosetta Stone, Anixter and Alteryx is currently projected at 12.5%, 8% and 13.7%, respectively.

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