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Why Is Ametek (AME) Down 5.3% Since Last Earnings Report?

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It has been about a month since the last earnings report for Ametek (AME). Shares have lost about 5.3% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Ametek 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.

AMETEK Beats Q1 Earnings Estimates

AMETEK has reported first-quarter 2022 adjusted earnings of $1.33 per share, which beat the Zacks Consensus Estimate by 4.7%. Further, the bottom line rose 24% on a year-over-year basis.

Net sales of $1.458 billion lagged the Zacks Consensus Estimate of $1.461 billion. However, the top line rose 20% year over year.

Top-line growth was driven by strong performances of the Electronic Instruments Group (“EIG”) and Electromechanical Group (“EMG”) segments in the reported quarter.

AMETEK’s proper execution of the four core growth strategies — operational excellence, global market expansion, investments in product development and acquisitions — is expected to continue to aid financial growth in the near and long term. The AMETEK Growth Model is likely to continue driving the company’s business performance.

Segments in Detail

EIG (67.7% of total sales): AMETEK generated sales of $987.8 million from the segment, reflecting growth of 25% from the year-ago quarter. This can primarily be attributed to organic growth and positive contributions from acquisitions.

EMG (32.3% of sales): The segment generated $470.8 million of sales in the first quarter, which improved 11% on a year-over-year basis. The company’s solid operational execution and strong organic growth drove sales growth in the segment.

Operating Details

For the first quarter, operating expenses were $1.1 billion, up 19.8% year over year. The figure contracted 10 basis points (bps) from the year-ago quarter, as a percentage of net sales, to 75.8%.

Consequently, the operating margin was 24.2%, which expanded 10 bps from the year-ago figure.

The operating margin for EIG contracted 140 bps year over year to 24.8%, whereas the same for EMG expanded 250 bps from the year-ago quarter to 27.2%.

Balance Sheet

As of Mar 31, 2022 cash and cash equivalents were $340.3 million, down from $346.8 million as of Dec 31, 2021.

Inventories amounted to $866.5 million at the end of the first quarter compared with $769.2 million at the end of the prior quarter.

Long-term debt was $2.20 billion in the reported quarter, down from $2.23 billion in the prior quarter.

Guidance

For second-quarter 2022, the company expects sales growth of low to mid-single digits on a year-over-year basis.

AMETEK expects adjusted earnings of $1.27-$1.30 per share, suggesting year-over-year growth of 10-13%.

For 2022, the company expects high-single digits of sales growth from that reported in 2021.

The company revised its guidance for adjusted earnings upward from $5.30-$5.42 per share to $5.34-$5.44 per share, suggesting an increase of 10-12% from that reported in 2021.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended downward during the past month.

VGM Scores

At this time, Ametek has an average Growth Score of C, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of C on the value side, putting it in the middle 20% 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 these revisions indicates a downward shift. Notably, Ametek has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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