AMETEK (AME) Q3 Earnings Beat Estimates, Revenues Up Y/Y

AMETEK, Inc. (NYSE:AME) reported third-quarter 2019 adjusted earnings of $1.06 per share, which beat the Zacks Consensus Estimate by 5 cents and also surpassed management’s guidance of $1.00-$1.02. The figure improved 16.5% from the year-ago quarter and 0.9% sequentially.

Net sales improved 7% on a year-over-year basis but declined 0.9% sequentially to $1.28 billion. The figure fell short of the Zacks Consensus Estimate of $1.29 billion.

Robust organic growth and contributions from acquisitions drove year-over-year top-line improvement. Further, improved operational activities and strong segmental performance aided results.

We believe that the company’s proper execution of the four core growth strategies of operational excellence, global market expansion, investments in product development and acquisitions are expected to continue benefiting business growth in the near term as well as the long haul.

Top Line in Detail

AMETEK reports sales under two organized segments — Electronic Instruments Group (EIG) and Electromechanical Group (EMG).

EIG (63.9% of total sales): The company generated $815.6 million of sales from this segment, reflecting growth of 10% from the year-ago quarter. The benefits from acquisitions of Forza, Telular and Spectro Scientific drove year-over-year growth in this segment. Further, organic sales in the reported quarter remained positive in this segment.

EMG (36.1% of sales): This segment generated $461.1 million of sales in the first quarter, which improved 2.3% on a year-over-year basis. The segment’s top-line growth can primarily be attributed to solid organic sales growth and positive contributions from the Pacific Design Technologies buyout.

Operating Details

For the third quarter, operating margin was 23.6%, which expanded 140 bps from the year-ago quarter figure.

Segment wise, operating margins for EIG and EMG were 26.9% and 22.4 %, expanding 130 bps and 180 bps, respectively, on a year-over-year basis.

Operating expenses were $975.6 million, up 5.2% year over year. However, the figure contracted 140 bps from the year-ago quarter as a percentage of net sales.

Balance Sheet

As of Sep 30, 2019, cash and cash equivalents were $735.4 million, up from $567.9 million as of Jun 30, 2019.

Long-term debt was $2.2 billion, down from $2.4 billion in the previous quarter.

Guidance

For fourth-quarter 2019, AMETEK expects sales to improve by a mid-single digit on a year-over-year basis. The Zacks Consensus Estimate for sales is pegged at $1.33 billion.

Earnings are anticipated to be $1.01-$1.03 per diluted share, reflecting year-over-year growth of 5-7%. The Zacks Consensus Estimate for earnings is projected at $1.03.

For 2019, the company anticipates total sales to improve in the range of mid to high-single digits from 2018. Further, organic sales growth is projected at 3%. AMETEK also anticipates benefiting from acquisition contributions. The Zacks Consensus Estimate is pegged at $5.20 billion.

Further, AMETEK revised guidance upward for adjusted earnings per share from $4.04-$4.10 to $4.12-$4.14, reflecting growth of 13% from 2018. The Zacks Consensus Estimate for 2019 earnings is pegged at $4.10.

Zacks Rank & Key Picks

AMETEK currently has a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader technology sector are NetEase, Inc. (NASDAQ:NTES) , Itron, Inc. (NASDAQ:ITRI) and Five9, Inc. (NASDAQ:FIVN) . All the stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rate for NetEase, Itron and Five9 is currently pegged at 31.93%, 25% and 10%, respectively.

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