Mettler-Toledo (MTD) Q3 Earnings & Sales Beat, Fall Y/Y
Mettler-Toledo International, Inc. MTD reported third-quarter 2023 adjusted earnings of $9.80 per share, which beat the Zacks Consensus Estimate by 1.8%. The bottom line decreased 4% on a year-over-year basis.
Net sales of $942.5 million surpassed the Zacks Consensus Estimate of $940.7 million. The figure was down 4% on a reported basis and 5% on a currency-neutral basis from the year-ago quarter’s respective readings.
Nevertheless, strong momentum in the Food Retail segment and improving conditions in Europe were tailwinds.
Weak momentum across Industrial and Laboratory segments was a concern. Also, softness in Americas and especially in Asia/Rest of the World region, primarily due to tough market conditions in China, was a major headwind.
The company remains apprehensive due to uncertainties in the global economy, challenging market conditions in China, as well as overall dynamic market conditions.
MTD lost 29% on a year-to-date basis compared with the industry’s decline of 26.3%.
We believe the solid execution of the company’s Spinnaker and SternDrive programs is likely to aid its financial performance in the days ahead. Also, its portfolio strength, cost-cutting efforts, margin and productivity initiatives, as well as robust sales and marketing strategies, are expected to remain tailwinds.
Mettler-Toledo International, Inc. Price, Consensus and EPS Surprise
Mettler-Toledo International, Inc. price-consensus-eps-surprise-chart | Mettler-Toledo International, Inc. Quote
Top Line in Detail
By Segments: MTD reports revenues under three segments, namely Laboratory Instruments, Industrial Instruments and Food Retail, which accounted for 54%, 39% and 7%, respectively, of net sales in the third quarter. The Industrial and Laboratory segments witnessed a year-over-year decline of 6% and 9%, respectively, in the third quarter.
Nevertheless, the Food Retail segment witnessed growth of 49% year over year.
By Geography: Total sales from the Americas, Europe and Asia/Rest of the World contributed 42%, 27% and 31%, respectively, to net sales in the third quarter. Sales in the Americas and Asia/Rest of the World went down 3% and 14%, respectively, on a year-over-year basis. Sales in Europe grew 4% year over year.
Operating Results
The gross margin was 59.4%, expanding 10 basis points (bps) year over year.
Research & development (“R&D”) expenses were $46.13 million, up 4.5% from the year-ago quarter’s figure. Selling, general & administrative (“SG&A”) expenses decreased 6.8% year over year to $217.45 million.
As a percentage of sales, R&D expenses expanded by 40 bps year over year to 4.9%. SG&A expenses contracted by 60 bps year over year to 23.1%.
The adjusted operating margin was 31.4%, which expanded 20 bps from the prior-year quarter’s level.
Balance Sheet & Cash Flow
As of Sep 30, 2023, Mettler-Toledo’s cash and cash equivalent balance was $69.7 million, down from $83.6 million as of Jun 30, 2023.
Long-term debt was $1.93 billion at the end of the third quarter, down from $2.045 billion at the end of the second quarter.
Mettler-Toledo generated $264.3 million in cash from operating activities in the reported quarter compared with $266.8 million in the previous quarter. Free cash flow was $251.7 million in the reported quarter.
Guidance
For fourth-quarter 2023, Mettler-Toledo anticipates sales to decline by 7%-8% in local currency from the year-ago quarter’s reported figure. The Zacks Consensus Estimate for fourth-quarter sales is pegged at $1.02 billion.
Adjusted fourth-quarter earnings are anticipated to be $10.50-$10.70 per share, implying a 12-13% fall from the year-ago quarter’s reported number, which includes a foreign-currency headwind of 3%. The Zacks Consensus Estimate for earnings is pinned at $11.88 per share.
For 2023, Mettler-Toledo anticipates sales in local currency to be down 1% from the year-earlier figure. The Zacks Consensus Estimate for 2023 sales is pegged at $3.87 billion.
The company lowered its guidance for adjusted EPS from $40.30-$41.20 to $39.10-$39.30. The new guided range suggests a fall of 1% from the year-ago reported number. The Zacks Consensus Estimate for the same is pinned at $40.33.
Zacks Rank & Stocks to Consider
Currently, Mettler-Toledo has a Zacks Rank #5 (Strong Sell).
Some better-ranked stocks in the broader technology sector are Asure Software ASUR, Adobe ADBE and Arista Networks ANET. Asure Software sports a Zacks Rank #1 (Strong Buy), and Adobe and Arista Networks each carry a Zacks Rank #2 (Buy).
You can see the complete list of today’s Zacks #1 Rank stocks here.
Asure Software shares have lost 9.1% in the year-to-date period. The long-term earnings growth rate for ASUR is currently projected at 27%.
Adobe shares have gained 67.5% in the year-to-date period. The long-term earnings growth rate for ADBE is currently projected at 13.54%.
Arista Networks shares have increased 74.1% in the year-to-date period. The long-term earnings growth rate for ANET is currently projected at 20.40%.
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