Colfax's Organic Prospects Solid, Near-Term Risks Remain

We have issued an updated research report on Colfax Corporation (NYSE:CFX) on Jun 7, 2016. The company is one of the leading manufacturers of specialized products and services related to gas and fluid handling, and fabrication technology.

One of the most striking features of Colfax is its diversified product portfolio. The company’s Gas and Fluid Handling segment caters to the needs of customers in the power generation, oil, gas and petrochemical, mining, marine and general industrial and other end-markets, while its Fabrication Technology segment deals with products primarily used in cutting and joining of steel, aluminum and other metals and metal alloys.

In addition, Colfax has a vast client base, ranging from commercial to governmental customers, spread across the U.S., Europe, Asia, the Middle East and South America. The company is pursuing both organic and inorganic growth initiatives to expand its global presence, especially in emerging nations. Over the long run, Colfax expects organic growth 1−2% higher than the Gross Domestic Product and operating margins to come in the mid teens. Also, the company intends to boost free cash flow to fund acquisitions.

Despite such long-term growth prospects, Colfax’s exposure to certain headwinds has restricted its growth momentum in the near term. Moreover, the company’s business segments are highly susceptible to global economic conditions. Also, the company is exposed to risks arising from unfavorable movements in foreign currencies, weak order flow, intense competition and geopolitical issues.

For 2016, Colfax has reaffirmed its previously provided guidance. Adjusted earnings is predicted to be within $1.40−$1.55 per share, lower than $1.60 earned in 2015. Revenues are projected in a range of $3.60−$3.75 billion, down from $3.97 billion reported in 2015.

With a market capitalization of $3.6 billion, Colfax currently carries a Zacks Rank #3 (Hold). We believe the pros and cons clearly justify the company’s investment value. Some better-ranked stocks in the machinery industry include Gorman-Rupp Co. (NYSE:GRC) , Kadant Inc. (NYSE:KAI) and Nordson Corporation (NASDAQ:NDSN) . All these stocks sport a Zacks Rank #1 (Strong Buy).


NORDSON CORP (NDSN): Free Stock Analysis Report

KADANT INC (KAI): Free Stock Analysis Report

GORMAN RUPP CO (GRC): Free Stock Analysis Report

COLFAX CORP (CFX): Free Stock Analysis Report

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