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IDEX (IEX) Q4 Earnings Beat Estimates, 2021 View Impressive

IDEX Corporation IEX reported impressive results for the fourth quarter of 2020 with earnings surpassing estimates by 3.8%. This was the fourth consecutive quarter of better-than-expected results. Also, the period’s sales beat the Zacks Consensus Estimate by 2.1%.

The company’s adjusted earnings in the reported quarter were $1.37 per share, surpassing the consensus estimate of $1.32. Also, the bottom line grew 3% from the year-ago figure of $1.33 on the back of sales growth and an improvement in the operating margin.

In 2020, the company’s adjusted earnings were $5.19, decreasing 10.5% from the previous year. However, the bottom line exceeded the consensus estimate of $5.15.

Revenue Details

In the quarter under review, IDEX’s net sales were $614.8 million, reflecting year-over-year growth of 1.5%. The top line benefited from a 1% gain from acquired assets and a 2% contribution from foreign currency translation, partially offset by a 1% decline in organic sales.

Also, the company’s revenues surpassed the Zacks Consensus Estimate of $602 million.

Orders in the quarter totaled $678.6 million, reflecting year-over-year growth of 10%. Organically, orders increased 7% while acquired assets and foreign currency translation positively impacted orders by 1% and 2%, respectively.

The company currently reports under three business segments, results of which are discussed below:

Revenues from Fluid & Metering Technologies totaled $229.6 million, increasing 0.9% year over year. Organic sales were down 4% while acquisitions and foreign currency translation added 3% and 2%, respectively.

Revenues from Health & Science Technologies totaled $235.9 million, reflecting year-over-year growth of 3.8%. Organic sales in the quarter inched up 2% year over year and foreign currency translation left a positive impact of 2%.

Revenues from Fire & Safety/Diversified Products totaled $150.6 million, declining 1% year over year. The results were adversely impacted by a 3% decline in organic sales, partially offset by a 2% gain from foreign currency translation.

In 2020, the company’s net sales were $2.35 billion, down 5.7% from the previous year. However, the top line surpassed the Zacks Consensus Estimate of $2.34 billion.

Margin Profile

In the quarter under review, IDEX’s cost of sales increased 1.9% year over year to $345.7 million. Adjusted gross profit was $269.2 million, up 0.9% year over year while adjusted gross margin decreased 20 basis points (bps) to 43.8%. The gross margin suffered unfavorable impacts of business mix and lower volumes, partially offset by pricing.

Selling, general and administrative expenses decreased 0.4% year over year to $125.2 million. It represented 20.4% of revenues. Adjusted earnings before interest, tax, depreciation and amortization (EBITDA) in the quarter under review increased 4.8% year over year to $167.2 million. Also, adjusted EBITDA margin grew 90 bps year over year to 27.2%.

Adjusted operating income came in at $144 million, up 2% year over year while margin was at 23.4%, up 10 bps. Interest expenses in the quarter dipped 2.6% year over year to $10.8 million.

Balance Sheet and Cash Flow

Exiting the fourth quarter, IDEX’s cash and cash equivalents increased 16.9% sequentially to $1,025.9 million. Further, long-term debt of $1,044.4 million was flat on a sequential basis.

Notably, the company used $300 million for the redemption of 4.5% senior notes while it raised $499.1 million proceeds from the issuance of 3% senior notes in 2020.

IDEX generated net cash of $569.3 million from operating activities in 2020, increasing 7.8% from the previous year. Capital used for purchasing property, plant and equipment was $51.6 million, reflecting year-over-year growth of 1.2%. Free cash flow was $517.7 million, up 8.5% year over year.

The company paid out dividends totaling $151.8 million and repurchased shares worth $110.3 million in 2020, reflecting a year-over-year increase of 3.1% and 101.8%, respectively.

Acquisition

In January 2021, IDEX agreed to purchase Abel Pumps L.P. This buyout is predicted to boost its pump platform, which comes under the ambit of the Fluid & Metering Technologies segment.

Outlook

IDEX anticipates end-market conditions to improve in 2021. The company anticipates a 2-4% year-over-year improvement in organic sales in the first quarter of 2021 and a 6-8% in the full year.

Earnings are predicted to be $1.38-$1.42 in the first quarter and $5.65-$5.95 in 2021. The yearly projection is better than $5.19 recorded in 2020.

IDEX Corporation Price, Consensus and EPS Surprise

IDEX Corporation price-consensus-eps-surprise-chart | IDEX Corporation Quote

Zacks Rank & Stocks to Consider

With a market capitalization of $14.3 billion, the company currently carries a Zacks Rank #3 (Hold).Some better-ranked stocks in the industry are Altra Industrial Motion Corp. AIMC, EnPro Industries, Inc. NPO and Graco Inc. GGG, all currently carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

In the past 60 days, earnings estimates for both Altra Industrial and Graco improved for the current year while the same was stable for EnPro. Further, earnings surprise for the last reported quarter was 77.55% for Altra Industrial, 109.38% for EnPro and 19.61% for Graco.

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