A month has gone by since the last earnings report for Amtek (AME). Shares have added about 0.7% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Amtek due for a pullback? 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 (AME) Q2 Earnings and Revenues Beat Estimates
AMETEK reported second-quarter 2018 adjusted earnings of 83 cents per share, beating the Zacks Consensus Estimate by 5 cents and also surpassed management’s guided range of 76-78 cents per share. Further, the figure increased 28% from the year-ago quarter and 6.4% sequentially.
Net sales increased 14.1% on a year-over-year basis and 3.4% sequentially to $1.21 billion, driven by robust organic growth and strong contribution from acquisitions. The figure also came ahead of Zacks Consensus Estimate of $1.17 billion.
AMETEK recorded organic sales growth of 7% in the reported quarter. Additionally, improved operational activities drove the results.
The company continues to reap benefits from the execution of its four core growth strategies — operational excellence, global market expansion, investments in product development and strategic acquisitions.
Top Line in Detail
AMETEK reports sales in two organized segments — Electronic Instruments Group (“EIG”) and Electromechanical Group (“EMG”)
EIG (61.6% of total sales): The company generated $744.5 million of sales in this segment, up 3.9% sequentially and 13.2% from the year-ago quarter. Robust organic sales in this quarter drove year-over-year growth. Moreover, benefits from acquisitions contributed well to the results within this segment.
EMG (38.4% of sales): This segment generated $464.5 million of sales in this quarter, increasing 14.1% on year-over-year basis and 1.8% from the previous quarter. Year-over-year growth can primarily be attributed to solid organic sales growth and positive contributions from the acquisition of FMH Aerospace.
For the second quarter, operating margin was 22.3%, which expanded 70 basis points (bps) from the prior-year quarter and 30 bps on a sequential basis. This can primarily be attributed to robust performance of AMETEK in both the segments, which exhibited operational efficiency in the reported quarter.
EIG contributed 71.8% to the total operating income and improved 18.4% from the prior-year quarter, while EMG accounted for 34.9% of the operating income and was up 11.4% year over year.
Selling, general and administrative (SG&A) expenses were 12.2%, as percentage of sales, which contracted 20 basis points (bps) from the year-ago quarter but rose 50 bps on a sequential basis.
As of Jun 30, 2018, cash and cash equivalents was $557.7 million, up from $556.8 million as of Mar 31, 2018.
Long-term debt was $1.84 billion, which decreased from $1.89 billion in the previous quarter.
For third-quarter 2018, AMETEK expects sales to increase by high-single digit on a year-over-year basis.
Earnings are anticipated to lie in the range of 76-78 cents per diluted share, which reflects year-over-year growth of 15-18%.
For 2018, the company anticipates total sales to grow by low-double digits and organic sales by mid-single digit.
Further, AMETEK revised its guided range upward for adjusted earnings per share from $3.06-$3.12 to $3.16-$3.2, which reflects 21-23% growth from 2017.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates.
Currently, Amtek has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% 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.
Our style scores indicate that the stock is more suitable for momentum investors than growth investors.
Estimates have been trending upward for the stock, and the magnitude of this revision looks promising. It comes with little surprise Amtek has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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