Ametek (AME) Q1 Earnings & Revenues Exceed Expectations

AMETEK Inc.’s (NYSE:AME) first-quarter 2017 earnings of 60 cents per share came ahead of the Zacks Consensus Estimate. Earnings were up 3.4% sequentially and 5.3% year over year. Earnings also exceeded the guided range of 55 cents to 57 cents.

The company’s revenues were positively impacted by robust organic growth and input from recently completed acquisitions.

The solid performance was particularly driven by increased sales and operational excellence initiatives. This, in combination with a strong portfolio of differentiated businesses, is expected to help the company post better results, going forward.

The company continues to reap the benefits from the execution of its four core growth strategies of operational excellence, global market expansion, investments in product development and strategic acquisitions.

Quarter to date, the stock has outperformed the Zacks Electronics-Testing Equipment industry. It gained 6.5% compared with the industry’s gain of 5.5%.

The numbers in detail-

Total Revenue

AMETEK reported revenues of $1.01 billion, up 3.6% sequentially and 6.7% year over year. Revenues came ahead of the Zacks Consensus Estimate of $956 million.

The company has two operating segments — Electronic Instruments Group (EIG) and Electromechanical Group (EMG) — which accounted for 62% and 38%, respectively of total revenue in the fourth quarter.

AMETEK, Inc. Revenue (TTM)

Revenues by Segment

Revenues of EIG were up 0.6% sequentially and 8.9% on a year-over-year basis to $619.8 million. The year-over-year increase was due to robust core growth and contribution from the acquisitions of ESP/SurgeX, Brookfield Engineering Laboratories, Nu Instruments, Rauland-Borg and HS Foils.

EMG sales were up 8.7% sequentially and 3.3% on a year-over-year basis to $387.9 million. The year-over-year improvement was mainly due to solid core growth across Differentiated and Floorcare businesses and contribution from Laserage acquisition.

Operating Performance

AMETEK’s gross margin for the quarter was 34%, up 402 basis points (bps) from 30% in the preceding quarter but down 189 bps from 35.9% a year ago.

The company reported operating income of $220.3 million, higher than the previous quarter’s income of $212.7 million and the year-ago quarter figure of $208.5 million.

Operating margin of 21.9% was flat sequentially but down 22 bps year over year.

Net Income

AMETEK’s net income was $138.9 million, or 13.8%, compared with $134.7 million, or 13.8% of sales, in the previous quarter and $134.2 million, or 14.2%, in the year-ago period.

Earnings of 60 cents per share were higher than 58 cents in the prior quarter and 57 cents reported in the year-ago quarter.

Balance Sheet

Cash and cash equivalents balance at the end of the first quarter was $570.2 million, down from $717.3 million in the previous quarter. Long-term debt was $2.08 billion, up from $2.06 billion in the previous quarter.

Outlook

For the second quarter, management expects revenues to be up in mid-single digits year over year on a percentage basis. Earnings are expected to be in the range of 60 cents to 62 cents per share. For the second quarter, the Zacks Consensus Estimate is pegged at 62 cents.

For 2017, management expects revenues to be up in mid-single digits from 2016. Earnings are expected to be in the range of $2.40 to $2.48 per share. For 2017, the Zacks Consensus Estimate is pegged at $2.44 per share.

Zacks Rank and Other Stocks to Consider

Currently, AMETEK has a Zacks Rank #2 (Buy). Stocks worth considering in the broader technology sector include Alphabet Inc. (NASDAQ:GOOGL) , sporting a Zacks Rank #1 (Strong Buy), and Internap Corporation (NASDAQ:INAP) and Monolithic Power Systems, Inc. (NASDAQ:MPWR) , each carrying a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term expected earnings per share growth rates for Alphabet, Internap and Monolithic Power are 16.3%, 3% and 17%, respectively.

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