We have issued an updated research report on IDEX Corporation IEX on Oct 4.
The company deals in a diverse range of applications such as fluid and metering technologies; health and science technologies; and fire, safety and other products built to customer specifications. It has many tailwinds and headwinds impacting its performance.
A brief discussion of the various factors has been mentioned below.
A well-diversified business structure and solid execution capabilities are IDEX’s biggest advantages. It has exposure in various end-markets, including food, chemical, general industrial, water & wastewater, agricultural, energy, health, and others. Weakness in one or more markets is usually offset by strength in others. Also, a solid product portfolio — pumps, compressors, flow meters, degassing equipment, corrective tubing, fittings, fire-fighting pumps, rescue tools, lifting bags and others — raises the company’s competitive appeal.
Also, it effectively uses capital in growth investments, paying dividends, repurchasing shares and making acquisitions. While dividends and share buybacks improve shareholders’ value, acquisitions help in solidifying the company’s product portfolio and leveraging business opportunities. IDEX acquired the intellectual property assets of Phantom Controls in June 2018 and added Finger Lakes Instrumentation to its portfolio in July 2018. IDEX acquired Velcora Holding AB, with its Steridose and Roplan businesses, in July 2019. Since acquired, the buyout is strengthening the sealing solutions platform.
IDEX anticipates adjusted earnings per share of $5.78-$5.85 for 2019 and $1.45-$1.47 for the third quarter.
Despite the above-mentioned tailwinds and the positive industry trends (i.e. infrastructure investments, use of sophisticated technologies in manufacturing process, favorable policy changes in the country, growing use of e-retail, remodeling activities and others); IDEX faces risks from geopolitical uncertainties and prevalent trade issues. Also, rise in the cost of sales (due to ongoing trade disputes with foreign countries) and operating expenses is concerning.
In addition, unfavorable foreign currency movements might adversely influence results; with sales predicted to decline 1% both in the third quarter and 2019. Moreover, organic sales in 2019 are predicted to grow 3-4%, whereas it recorded an 8% rise in 2018.
Furthermore, the company faces competition from other players in the industry, including Colfax Corporation CFX, Xylem Inc. XYL and Dover Corporation DOV.
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