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IDEX (IEX) to Benefit From Business Strength Amid Headwinds

IDEX Corporation IEX has been benefiting from strong performance of the Fire & Safety/Diversified Products (FSDP) segment, driven by increasing orders from industrial and municipal markets. Solid demand for products in the fire & safety and Band-It businesses is driving the FSDP segment’s revenues, of late. In the first quarter of 2024, the segment’s revenues increased 2% on a year-over-year basis. Driven by strength across its businesses, the company expects its overall organic revenues growth to be 0-2% from the year-ago levels in 2024.

IEX remains focused on acquiring businesses to gain access to new customers, regions and product lines. In December 2023, it acquired advanced material science solutions provider STC Material Solutions for $206 million. This buyout expanded the company’s growing expertise in the material sciences space.

The acquisition of Iridian Spectral in May 2023 expanded IDEX’s vast array of optical technology offerings. Also, the Muon Group buyout in November 2022 expanded the company’s offerings of highly-engineered solutions for mission-critical applications. IEX anticipates buyout synergies to boost sales by approximately 1% in 2024.

Management remains committed to rewarding shareholders through dividend payouts and share buybacks. For instance, in the first quarter of 2024, it paid dividends of $48.5 million. Also, in 2023, it distributed dividends of $190.7 million and repurchased common stocks worth $24.2 million. It announced a hike of 7.8% in its quarterly dividend rate in May 2024.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

In the past month, the Zacks Rank #3 (Hold) company has lost 8.4% compared with the industry’s 5.2% decline.

However, weakness in the Health & Science Technologies (HST) segment due to softness in the life sciences, analytical instrumentation, semiconductor and industrial end markets raises concerns. In the first quarter, the HST segment’s revenues declined 12%, following an 11% decline in the preceding quarter.

Escalating operating expenses have also been a major concern for the company. For instance, its selling, general and administrative expenses increased 2.8% year over year in the first three months of 2024 due to an increase in employee-related costs. As a percentage of sales, the metric increased by 200 basis points to 24.4% in the same period. An increase in expenses, if not controlled, might hurt the company’s margins and profitability in the quarters ahead.

Key Picks

Some better-ranked companies from the same space are discussed below.

Applied Industrial Technologies, Inc. AIT presently sports a Zacks Rank of 1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

It has a trailing four-quarter average earnings surprise of 8.2%. The consensus estimate for AIT’s fiscal 2024 earnings has improved 1.4% in the past 60 days.

Crane Company CR presently carries a Zacks Rank of 2 (Buy). CR delivered a trailing four-quarter earnings surprise of 15.2%, on average.

The Zacks Consensus Estimate for CR’s 2024 earnings has risen 4% in the past 60 days.

Ingersoll Rand Inc. IR presently carries a Zacks Rank #2 and has a trailing four-quarter earnings surprise of 12.9%, on average.

The Zacks Consensus Estimate for IR’s 2024 earnings has grown 1.9% in the past 60 days.

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Zacks Investment Research