Why Is Idex (IEX) Down 0.3% Since Last Earnings Report?

A month has gone by since the last earnings report for Idex (IEX). Shares have lost about 0.3% in that time frame, outperforming the S&P 500.

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

IDEX Q1 Earnings Top Estimates, Revenues Increase

IDEX reported better-than-expected results for the first quarter of 2019. It pulled off a positive earnings surprise of 5.11%.

The company's adjusted earnings per share were $1.44, surpassing the Zacks Consensus Estimate of $1.37. Further, the bottom line increased 12% from the year-ago quarter figure of $1.29. The improvement was driven by healthy organic growth and diligent execution of productivity initiatives.

Revenues

IDEX generated revenues of $622.2 million in the quarter under review, reflecting year-over-year growth of 2%. The top-line improvement came on the back of 4% growth in organic sales, partially offset by 2% adverse impact of forex woes.

However, the top line lagged the consensus estimate of $635 million by 2%.

In the first quarter, orders increased 4% year over year to $655.5 million. As noted, organically orders improved 6%, acquisitions had positive impact of 1% and foreign currency movements had an adverse 3% impact.

IDEX reports revenues under the segments discussed below:

Net sales of Fluid & Metering Technologies were $242.5 million, up 4% year over year. Organic net sales grew 6% while forex headwinds had 2% impact.

Revenues from Health & Science Technologies totaled $225.3 million, reflecting year-over-year growth of 2%. Results were driven by 3% organic sales growth and 1% gain from acquisitions, partially offset by forex woes of 2%.

Fire & Safety/Diversified Products revenues were $156.2 million, down 2% from the year-ago quarter. Organic sales improved 1% while currency translation had adverse 3% impact.

Margin Details

In the reported quarter, IDEX's cost of sales increased 0.8% year over year to $338.4 million. It represented 55.4% of the quarter’s revenues compared with 54.8% in the year-ago quarter. Gross margin improved 40 basis points (bps) to 45.6% on the back of benefits from higher volumes, pricing and productivity actions. However, rise in engineering costs played spoilsport. Selling, general and administrative expenses decreased marginally to $136.5 million. It represented 21.9% of revenues compared with 22.5% a year ago.

Adjusted operating income increased 8.1% to $147.8 million, and margin improved 120 bps to 23.8%. On a segmental basis, adjusted operating income for the FMT segment increased 8.4% to $71.9 million and that for HST expanded 2.5% to $54.2 million while for FSDP it increased 1.5% to $40.3 million. Adjusted effective tax rate in the reported quarter was 19.5%.

Balance Sheet and Cash Flow

Exiting the first quarter, IDEX had cash and cash equivalents of $456.1 million, down 2.3% from $466.4 million recorded at the end of the last reported quarter. Long-term borrowings were flat sequentially at $848.4 million.

In the first quarter, the company generated net cash of $88.7 million from operating activities, reflecting growth of 23.7% from the year-ago quarter. Free cash flow was $75.8 million, up 23%.

Outlook

For 2019, adjusted earnings are anticipated to be $5.70-$5.85, higher than $5.60-$5.80 per share stated earlier. Results in the year will likely gain from improved first-quarter results, favorable tax impacts, diversified business structure, solid product portfolio, growth investments and solid execution abilities. However, the company expressed concerns about geopolitical uncertainties and prevalent trade issues. Organic revenue growth is estimated to be roughly 4-5%.

For the second quarter, earnings per share are expected to be $1.47-$1.50. Organic sales will likely increase 4-5%.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates.

VGM Scores

Currently, Idex has a great Growth Score of A, though it is lagging a bit on the Momentum Score front 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 B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Idex has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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