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Why Is Amtek (AME) Down 3.7% Since Last Earnings Report?

Zacks Equity Research
Cronos Group (CRON) closed at $14.99 in the latest trading session, marking a +0.33% move from the prior day.

It has been about a month since the last earnings report for Amtek (AME). Shares have lost about 3.7% in that time frame, outperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Amtek due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

AMETEK's Earnings and Revenues Beat Q1 Estimates

AMETEK delivered first-quarter 2019 adjusted earnings of $1 per share, which beat the Zacks Consensus Estimate by 3 cents and also surpassed management’s guidance of 95-97 cents. The figure increased 15% from the year-ago quarter and 16.3% sequentially.

Net sales increased 10.2% on a year-over-year basis and 1.6% sequentially to $1.29 billion. The figure topped the Zacks Consensus Estimate of $1.27 billion. Robust organic growth and positive contributions from acquisitions drove year-over-year top-line improvement.

The company recorded organic sales growth of 5% in the reported quarter. Improved operational activities and strong segmental performance also aided results.

We believe that the company’s proper execution of the four core growth strategies of operational excellence, global market expansion, investments in product development and acquisitions are expected to continue benefiting business growth in the near term as well as in the long haul.

Top Line in Detail

AMETEK reports sales undertwo organized segments — Electronic Instruments Group (“EIG”) and Electromechanical Group (“EMG”).

EIG (62.7% of total sales): The company generated $806.9 million of sales from this segment, which reflected growth of 13% from the year-ago quarter. The benefits from acquisitions of Forza, Motec, Tellular, Spectro Scientific and Soundcom drove year-over-year growth in this segment. Further, organic sales in the reported quarter remained positive in this segment.

EMG (37.3% of sales): This segment generated $480.8 million of sales in the first quarter, which increased 5.4% on a year-over-year basis. Top-line growth in this segment can primarily be attributed to solid organic sales growth.

Operating Details

For the first quarter, operating margin was 22.2%, which was in line with the year-ago quarter’s figure.

Segment wise, operating margins for EIG and EMG were 25.2% and 20.6%, contracting 40 bps and expanded 70 bps, respectively, on a year-over-year basis.

Selling, general and administrative (SG&A) expenses were 11.9% as a percentage of sales, expanding 20 bps from the year-ago quarter.

Balance Sheet

As of Mar 31, 2019, cash and cash equivalents were $368.1 million, up from $354 million as of Dec 31, 2018.

Long-term debt was $2.37 billion, up from $2.27 billion in the previous quarter.

Guidance

For second-quarter 2019, AMETEK expects sales to grow by a high-single digit on a year-over-year basis.

Earnings are anticipated to be $1.00-$1.02 per diluted share, reflecting year-over-year growth of 9-11%.

For 2019, the company anticipates total sales to grow in a high-single digit and organic sales to rise 3-5%.

Further, AMETEK revised guidance upward for adjusted earnings per share from $3.95-$4.05 to $3.98-$4.08, reflecting growth of 9-11% from the actual figure reported in 2018.

How Have Estimates Been Moving Since Then?

Fresh estimates followed an upward path over the past two months.

VGM Scores

At this time, Amtek has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. Following the exact same course, 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 B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

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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