It has been about a month since the last earnings report for Idex (IEX). Shares have lost about 1.3% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Idex due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
IDEX (NYSE:IEX) Q1 Earnings & Revenues Beat Estimates, Decline Y/Y
IDEX reported better-than-expected results for first-quarter 2020, with earnings and sales surpassing estimates by 3.10% and 0.08%, respectively.
The company’s adjusted earnings per share were $1.33, beating the Zacks Consensus Estimate of $1.29. However, the bottom line decreased 7.6% from the year-ago quarter’s $1.44 per share.
Revenue Details
IDEX generated revenues of $594.5 million in the quarter, down 4.5% from the year-ago quarter. Acquisitions had a positive impact of 2% on sales, while organic sales declined 5% and forex woes affected results by 1% in the quarter.
In addition, the company’s revenues managed to beat the Zacks Consensus Estimate of $594 million.
In the reported quarter, orders declined 2% year over year to $644.9 million. As noted, orders were down 2% organically. Forex woes hurt orders by 1%, while acquisition boosted the same by 1%.
IDEX reports revenues under the segments discussed below:
Fluid & Metering Technologies’ (“FMT”) net sales were $226.9 million, down 6% year over year. Organic net sales declined 5%, while forex headwinds had a 1% impact.
Revenues from Health & Science Technologies (“HST”) totaled $224.1 million, reflecting a year-over-year decline of 1%. Results reflected 4% organic sales decline, 4% gain from acquisitions and 1% adverse impact from forex woes.
Fire & Safety/Diversified Products’ (“FSDP”) revenues were $144.3 million, down 8% from the year-ago quarter. Organic sales decreased 7% and currency translation had an adverse 1% impact.
Margin Profile
In the reported quarter, IDEX’s cost of sales dipped 4.7% year over year to $322.5 million. It represented 54.2% of the quarter’s revenues compared with 54.4% in the year-ago quarter. Gross margin improved 20 basis points (bps) year over year to 45.8%. Selling, general and administrative expenses declined 3% to $132 million. It represented 22.2% of revenues compared with 21.9% in the year-ago quarter.
Operating income in the quarter dipped 5.3% year over year to $139.9 million, with margin down 30 bps to 23.5%. On a segmental basis, operating income for FMT declined 7.1% to $66.8 million, that for HST dipped 3% to $52.6 million, and for FSDP it moved down 5.7% to $38 million. Effective tax rate in the reported quarter was 20%.
Balance Sheet and Cash Flow
Exiting the first quarter, IDEX had cash and cash equivalents of $569.2 million, down 10% from $632.6 million recorded at the end of 2019. Long-term borrowings increased 17.7% sequentially to $999 million.
In the first three months of 2020, the company generated $84.8 million of net cash from operating activities, reflecting a decline of 4.4% from the year-ago comparable period. Capital spending on the purchase of property, plant and equipment was $12.8 million, roughly flat year over year. Free cash flow in the quarter declined 5% to $72 million.
In the first quarter of 2020, the company bought back 867,000 shares worth $108.9 million and distributed dividends totaling $38.7 million.
Outlook
On account of the coronavirus-led issues, IDEX anticipates a sales decline of 15-25% for the second quarter of 2020.
It is worth noting that on uncertainties, regarding the duration and impact of the coronavirus outbreak on financial and operating results, the company has now withdrawn its prior-issued guidance for 2020.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review. The consensus estimate has shifted -6.45% due to these changes.
VGM Scores
Currently, Idex has a nice Growth Score of B, a grade with the same score on the momentum front. However, the stock was allocated a grade of F on the value side, putting it in the fifth quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Idex has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.
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