Colfax Corporation (CFX) reported better-than-expected results for fourth-quarter 2014. Adjusted earnings came in at 72 cents per share, up 18% from 61 cents earned in the year-ago quarter. The bottom line also surpassed the Zacks Consensus Estimate of 64 cents per share.
For 2014, Colfax's adjusted earnings were $2.20 per share, up compared with $2.04 per share in 2013 and above the Zacks Consensus Estimate of $2.12.
Revenues
Colfax’s net sales in the quarter totaled $1,206.4 million, reflecting an increase of 3% over the year-ago tally. The improvement can be attributed to a 13.3% contribution from acquisitions, partially offset by a 3.4% decline in organic revenues and 6.9% negative impact from foreign currency translation.
However, the top line lagged the Zacks Consensus Estimate of $1,272 million.
Colfax reports its net sales under two heads/segments. The segmental results are briefly discussed below:
The Gas and Fluid Handling segment generated sales of $622.1 million, decreasing 4.4% year over year. Organically, revenues were down 5.3%, due primarily to sales decline in power generation, marine and oil, gas & petrochemical end-markets.
Revenues from the Fabrication Technology segment rose 12.2% year over year to $584.3 million. The segment’s organic revenue was down 1.1% year over year owing to lower volumes in the quarter.
Total orders inched up 4.1% year over year to $570.1 million, while backlog stood at $1,402.3 million at the end of fourth-quarter 2014.
For 2014, the company generated net sales of $4,624.5 million, up 9.9% year over year.
Margins
Colfax’s cost of sales edged up 0.1% year over year, representing 67.5% of total revenue as against 69.5% in the year-ago quarter. Gross margin improved by 200 basis points year over year to 32.5%. Selling, general and administrative (SG&A) expenses, as a percentage of revenue, stood at 21.1%, against 18.8% recorded in the year-ago quarter.
Adjusted operating income grew 9.9% year over year to $136.7 million, while margin came in at 11.3% versus 10.6% in the year-ago comparable quarter.
Balance Sheet and Cash Flow
Exiting fourth-quarter 2014, Colfax’s cash and cash equivalents were $305.4 million, up compared with $286.6 million at the end of the preceding quarter. Long-term debt decreased 4.9% sequentially to $1,529.4 million.
In 2014, Colfax generated cash of $385.8 million from its operating activities versus $362.2 million in the previous year. Capital spending increased 13.8% year over year to $81.3 million.
Outlook: For 2015, Colfax lowered its sales guidance to a range of $4.250−$4.4 billion from the prior projection of $4.525−$4.675 billion.
Adjusted earnings are estimated within $2.03−$2.23 per share, down from $2.20−$2.40 forecasted previously. The reduced guidance takes into account the adverse impacts of foreign currency translations.
Generally Accepted Accounting Principles (“GAAP”) earnings per share are expected in the range of $1.75−$1.95 versus the prior prediction of $1.92−$2.13.
Tax rate is projected within 28−30%, while interest expense is expected to be nearly $52 million.
With a market capitalization of $6 billion, Colfax currently carries a Zacks Rank #4 (Sell). Some better-ranked stocks in the industry include II-VI Incorporated (IIVI), Kadant Inc. (KAI) and The Middleby Corporation (MIDD). While II-VI Incorporated sports a Zacks Rank #1 (Strong Buy), both Kadant and Middleby Corporation carry a Zacks Rank #2 (Buy).
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