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Idex (IEX) Up 2.9% Since Last Earnings Report: Can It Continue?

A month has gone by since the last earnings report for Idex (IEX). Shares have added about 2.9% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Idex due for a pullback? 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 drivers.

IDEX Q4 Earnings Beat Estimates, 2021 View Impressive

IDEX 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.

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.

How Have Estimates Been Moving Since Then?

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

VGM Scores

At this time, Idex has an average Growth Score of C, a grade with the same score on the momentum front. Charting a somewhat similar path, 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.

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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