AMETEK (AME) Posts In-Line Q2 Earnings, Misses Revenues

AMETEK Inc.’s (NYSE:AME) second-quarter 2016 earnings of 59 cents per share matched the Zacks Consensus Estimate. Earnings increased 3.0% sequentially but declined 11.1% year over year.

Total Revenue

AMETEK reported revenues of $977.7 million, up 3.5% sequentially but down 2.6% year over year. However, revenues came in below the Zacks Consensus Estimate of $990.0 million.

The company has two operating segments — Electronic Instruments Group (EIG) and Electromechanical Group (EMG) — which accounted for 61% and 39% respectively of the total second-quarter revenue.

Revenues by Segment

Revenues of EIG were up 4.8% sequentially but down 0.1% on a year-over-year basis to $596.0 million. The sequential increase was driven by contribution from the acquisitions of ESP/SurgeX and Brookfield Engineering Laboratories, partially offset by lower revenues in the process business due to weakness in oil and gas.

EMG sales were up 1.7% sequentially but down 6.3% on a year-over-year basis to $381.7 million. The decline was mainly due to deflation across packaging, Interconnects and Engineered Materials Business.

Operating Performance

AMETEK’s gross margin for the quarter was 36.4%, up 52 basis points (bps) from 35.9% in the preceding quarter but down 42 bps from 36.8% a year ago.

The company reported operating income of $219.0 million, higher than the previous quarter’s income of $208.5 million but lower than the year-ago quarter figure of $240.3 million.

Operating margin of 22.4% was up 32 bps sequentially but down 154 bps year over year.

Net Income

AMETEK’s net income was $138.2 million, or 14.1% of net income margin, compared with $134.2 million, or 14.2%, in the previous quarter and $155.5 million, or 15.5%, in the year-ago period.

Adjusted earnings of 59 cents per share were higher than 57 cents in the prior quarter but lower than 64 cents reported in the year-ago quarter.

Balance Sheet

Cash and cash equivalents balance at the end of the quarter was $456.2 million, up from $386.9 million in the previous quarter. Long-term debt was $1.54 billion versus $1.55 billion in the previous quarter.

The company reported operating cash flow of $189 million, reflecting an increase of 16% year over year.

Outlook

For 2016, management expects revenues to be down by low single digits from 2015. Earnings are expected to be in the range of $2.28 to $2.32 per share. For 2016, the Zacks Consensus Estimate is pegged at $2.45.

For the third quarter, management expects revenues to be down mid single digits from the third quarter of 2015. Earnings are expected to be in the range of 54 cents to 55 cents per share. For the upcoming quarter, the Zacks Consensus Estimate is pegged at 64 cents.

Our Take

AMETEK’s second-quarter results were in line with management’s expectation. The bottom line matched the Zacks Consensus Estimate whereas the top line missed the same.

On a year-over-year basis, revenues were negatively impacted by reduced demand stemming from the weakness in oil and gas, metals and global industrial markets.

The company believes that strong execution of its four core growth strategies of operational excellence, global market expansion, investments in product development and strategic acquisitions will continue to drive growth. This, in combination with a strong portfolio of differentiated businesses, will help the company to post better results, going forward.

AMETEK has a Zacks Rank #4 (Sell).

AMETEK INC Price, Consensus and EPS Surprise

AMETEK INC Price, Consensus and EPS Surprise | AMETEK INC Quote

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