Reasons Why You Should Avoid Betting on IDEX (IEX) Stock Now
IDEX Corporation IEX has failed to impress investors with its recent operational performance due to weakness in the Health & Science Technologies ("HST") segment, rising operating costs and foreign currency headwinds. These factors are likely to impede the company’s earnings in the quarters ahead.
Let’s delve deeper to unearth the factors that may continue taking a toll on this Zacks Rank #5 (Strong Sell) company.
Business Weakness: Weakness in the HST segment due to inventory destocking in the analytical instrumentation, life sciences, biopharma and semiconductor end markets raises concerns for the company. In the second quarter, the segmental adjusted EBITDA margin was down 420 bps year over year due to unfavorable volume leverage and mix, and soaring employee-related costs.
Though IDEX had previously expected a modest rebound in the HST segment for the second half of 2023, it no longer anticipates a recovery due to the normalization in supply chains and lower-than-expected growth in China. Considering this, IEX has lowered its organic revenue guidance for 2023. The company now anticipates organic revenues to decline 1-2% year over year against 0-3% growth predicted earlier. It also expects HST segment’s revenues to decline in the high single-digits in 2023. Also, IDEX’s material processing technology business is experiencing softness across pharma, biopharma and nutrition end markets, due to tighter capital availability and customer hesitancy arising from recession concerns.
Increasing Costs and Expenses: IDEX has been dealing with the adverse impacts of the high cost of sales. The company’s cost of sales increased 9.8% year over year in the first six months of 2023 due to increasing raw material costs. Selling, general and administrative expenses grew 13.1% year over year in the same period due to higher employee-related costs and discretionary spending.
Forex Woes: Given its widespread presence in international markets, IDEX is exposed to unfavorable foreign currency movements. In second-quarter 2023, forex woes lowered sales by 1% at the Fluid & Metering Technologies segment. In the same period, unfavorable movements in foreign currencies hurt the company’s total sales by 1%.
Southbound Estimate Revisions: In the past 60 days, the Zacks Consensus Estimate for IEX’s 2023 earnings has been revised 6.2% downward.
Price Performance: Amid these negatives, shares of IEX have risen 3.3% in a year, underperforming the industry‘s 19.1% growth.
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Some better-ranked companies from the Industrial Products sector are discussed below:
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CAT’s earnings surprise in the last four quarters was 17.8%, on average. In the past 60 days, estimates for Caterpillar’s earnings have increased 10.5% for 2023. The stock has gained 62.7% in the past year.
Ingersoll Rand Inc. IR currently flaunts a Zacks Rank of 1. IR’s earnings surprise in the last four quarters was 14.9%, on average.
In the past 60 days, estimates for Ingersoll Rand’s earnings have increased 3% for 2023. The stock has gained 43.5% in the past year.
Eaton Corporation plc ETN presently carries a Zacks Rank of 2 (Buy). The company delivered a trailing four-quarter earnings surprise of approximately 3%, on average.
In the past 60 days, estimates for Eaton’s earnings have increased 3.9% for 2023. The stock has soared 56.9% in the past year.
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Caterpillar Inc. (CAT) : Free Stock Analysis Report
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IDEX Corporation (IEX) : Free Stock Analysis Report
