Colfax Retains 2017 Guidance, Provides 2018 & Long-Term View

Yesterday, Colfax Corporation (NYSE:CFX) announced its outlook for 2018 and also reaffirmed its predictions for the current year.

Starting with current-year expectations, the machinery company retained its earnings outlook in the $1.65-$1.75 per share range. Excluding the contribution from the divested Fluid Handling assets, earnings from continuing operating is expected to come within $1.37-$1.47. Emphasizing the importance of organic growth, Colfax anticipates new product innovations to be a major catalyst. Also, savings of $50 million from cost-reduction measures will be advantageous.

For 2018, Colfax anticipates gaining from its popular brands — ESAB, under the Fabrication Technology business and Howden, under the Air & Gas Handling business. It believes that ESAB will gain from new products, strengthening regional market conditions and benefits from acquired assets while Howden’s growth will be driven by industrial and mining industries, recovering oil & gas market and initiatives to boost margins. Besides these brands, the company expects meaningful acquisitions to support growth in unexplored markets and new business platforms.

All these aspects are likely to boost Colfax’s 2018 earnings per share from continuing operations by more than 20% over 2017 prediction to $1.65-$1.80. After adding back intangibles amortization and other non-cash acquisition-related charges, adjusted earnings for the year are anticipated to in the $2.00-$2.15 per share range.

In addition to the earnings projections, Colfax noted that its organic revenue growth will be flat to up 2%. Orders for aftermarket services as well as from general industrial market will improve in 2018. Oil & gas orders are likely to pick up in the second half while that from the power industry will fall during the year. Restructuring measures will lead to $25-$30 million in savings while inflation and growth investments (net of productivity) will have an adverse impact of $10-$20 million. Interest expenses are predicted to be $28-$32 million.

Over the long term (three to four years), Colfax anticipates organic growth to be 1-2% above GDP, and segment margins in the mid-teens level. Acquiring meaningful businesses and innovating new products will remain a priority.

In a month, the company’s shares have yielded 7.7% return, outperforming 3.2% gain recorded by the industry it belongs to.


Zacks Rank & Stocks to Consider

Colfax currently has a $4.7 billion market capitalization and carries a Zacks Rank #3 (Hold). The stock’s Zacks Consensus Estimate is pegged at $1.71 for 2017 and $1.77 for 2018, representing growth of 1.8% and decline of 6.8% from their respective tallies 60 days ago.

Colfax Corporation Price and Consensus