Here’s Why You Should Avoid Betting on IDEX (IEX) Stock Now

IDEX Corporation Price and Consensus | IDEX Corporation Quote

Headwinds From Higher Costs and Expenses: On a year-over-year basis, IDEX’s costs of sales and operating expenses increased 9.6% and 4%, respectively in the first nine months of 2018. Increase in engineering costs was creating headwinds during the period. Furthermore, we believe that any incremental costs and expenses on account of the trade dispute between the United States and other foreign nations can add to the company’s woes.

For 2018, IDEX estimates its corporate expenses to be approximately $78-$80 million, a revision from the previously mentioned $76-$80 million.

It’s worth noting here that IDEX has been suffering from these issues for quite some time. In the last five years (2013-2017), the company’s cost of sales increased 1.8% (CAGR) and operating expenses grew 1.9% (CAGR).

Long-Term Debt: IDEX’s long-term debts in the last five years (2013-2017) increased 2.2% (CAGR). Though the debt of $848 million at the end of the first nine months of 2018 reflects 1.2% decline from the 2017 level, we believe that further issuances are bound to increase the balance.

If unchecked, high-debt levels can prove detrimental to the company’s margins and profitability in the quarters ahead.

Forex Woes: Geographical diversification is reflective of a flourishing business of IDEX. However, this diversity exposed the company to headwinds arising from geopolitical issues and unfavorable movements in foreign currencies. In the third quarter of 2018, forex woes adversely impacted sales growth by 1%.

In the fourth quarter of 2018, IDEX predicts an adverse impact of 1% on sales growth from unfavorable movements in foreign currencies.

Stocks to Consider

Some better-ranked stocks in the industry are DXP Enterprises, Inc. DXPE, EnPro Industries, Inc. NPO and Luxfer Holdings PLC LXFR. All these stocks currently sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

In the past 60 days, earnings estimates for all these three stocks improved for the current year. Further, positive earnings surprise for the last quarter was 17.95% for DXP Enterprises, 23.64% for EnPro Industries and 60.61% for Luxfer.

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