It has been about a month since the last earnings report for Idex (IEX). Shares have added about 7.1% 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 Stock Gains on Q3 Earnings Beat, Ups ’22 EPS View
IDEX reported impressive third-quarter 2022 results. The company’s earnings surpassed the Zacks Consensus Estimate by 6.5%, whereas sales beat the same by 5.8%. Following this stellar performance, shares of IEX gained 2.5% in after-hours trading on Oct 25.
In the reported quarter, IDEX’s adjusted earnings were $2.14 per share, beating the Zacks Consensus Estimate of $2.01. On a year-over-year basis, the bottom line increased 31.3% from the year-ago quarter’s $1.63. Healthy segmental results favorably impacted the quarter’s earnings.
Earnings for the third quarter exceeded management’s projection of $1.98-$2.03.
In the quarter under review, IDEX’s net sales were $824 million, reflecting year-over-year growth of 16%. Organic sales in the quarter increased 15% year over year, higher than 9-10% growth expected by IEX. Acquired assets boosted sales 3% and the exit of a COVID testing application had a 3% impact on sales. Foreign currency translation left a negative impact of 5%.
IDEX’s top line surpassed the Zacks Consensus Estimate of $779 million.
IEX reports net sales under three business segments, the results of which are discussed below:
Revenues from Fluid & Metering Technologies totaled $307.6 million, increasing 22% year over year. Organic sales were up 17% and synergies from acquired assets added 9%. Foreign currency translation left a negative impact of 4%.
Revenues from Health & Science Technologies totaled $345 million, reflecting year-over-year growth of 14%. Organic sales in the quarter increased 13% year over year, while the exit of a COVID testing application boosted sales 6%. Foreign currency translation left a negative impact of 5%.
Revenues from Fire & Safety/Diversified Products totaled $172.4 million, rising 8% year over year. The results were aided by a 14% increase in organic sales but suffered 6% forex woes.
In the quarter under review, IDEX’s cost of sales increased 10.5% year over year to $442.2 million. The adjusted gross profit was $363.9 million, up 13.5% year over year, while the adjusted gross margin was 45.1% compared with 45% reported in the year-ago quarter.
Selling, general and administrative expenses increased 10% year over year to $161.9 million. The same represented 19.6% of revenues. Adjusted earnings before interest, tax, depreciation and amortization (EBITDA) in the quarter under review increased 16% year over year to $231.4 million. The adjusted EBITDA margin increased 70 bps year over year to 28.7%.
The adjusted operating income was $201.1 million, up 16.2% year over year, whereas the margin was 24.9%, up 60 bps. Interest expenses in the quarter increased 1.1% year over year to $9.6 million.
Balance Sheet and Cash Flow
While exiting the third quarter, IDEX’s cash and cash equivalents decreased 20.4% to $680.7 million compared with $855.4 million recorded at the end of fourth-quarter 2021. Long-term borrowings were $1,191.1 million compared with $1,190.3 million recorded at the end of fourth-quarter 2021.
In the first nine months of 2022, IDEX generated net cash of $390.1 million from operating activities, decreasing 3% from the year-ago period. Capital used for purchasing property, plant and equipment was $48 million compared with $45.5 million in the first nine months of 2021. Free cash flow was $342.1 million, down 4.1% year over year.
IEX paid out dividends totaling $132.2 million and repurchased common stocks worth $146.3 million.
Amount spent on acquisitions, net of acquired cash, totaled $232.6 million.
For fourth-quarter 2022, IDEX anticipates adjusted earnings of $1.92-$1.97 per share and 9% growth in organic sales from the respective year-ago readings.
IEX predicts EPS of $1.75-$1.80 per share for fourth-quarter 2022.
For 2022, IDEX anticipates adjusted earnings of $8.04-$8.09 per share, higher than the $7.88-$7.98 per share projected earlier. Full-year earnings are predicted to be $7.75-$7.80, higher than the $7.19-$7.29 per share expected earlier.
Organic sales are predicted to grow approximately 12% for 2022 compared with 10% expected earlier.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended upward during the past month.
Currently, 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.
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Idex has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
Performance of an Industry Player
Idex belongs to the Zacks Manufacturing - General Industrial industry. Another stock from the same industry, Dover Corporation (DOV), has gained 11.9% over the past month. More than a month has passed since the company reported results for the quarter ended September 2022.
Dover Corporation reported revenues of $2.16 billion in the last reported quarter, representing a year-over-year change of +6.9%. EPS of $2.26 for the same period compares with $1.98 a year ago.
Dover Corporation is expected to post earnings of $2.15 per share for the current quarter, representing a year-over-year change of +20.8%. Over the last 30 days, the Zacks Consensus Estimate has changed -0.8%.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Dover Corporation. Also, the stock has a VGM Score of C.
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