Industrial goods manufacturer IDEX Corporation (IEX) reported strong second quarter 2013 earnings of 76 cents per share, up 13% from the year-ago quarter and ahead of the Zacks Consensus Estimate of 74 cents. Net income stood at $62.6 million, up 15.1% year over year. The healthy increase in earnings was driven by growth in operating income and margin improvement.
Revenues
Net sales in the reported quarter came in at $518.4 million versus $494.1 million in the year-earlier quarter. The quarterly revenues comprehensively beat the Zacks Consensus Estimate of $516 million. Orders stood at $506 million, up 9% from the year-ago period. While organic growth contributed 2% and 6% to quarterly sales and orders, respectively, inorganic growth contributed 3% each to the tallies.
By segments, Fluid and Metering Technologies (FMT) reported sales of $225 million, up 7% year over year. The Health and Science Technologies (HST) segment revenues came in at $181 million, improving 6% year over year, while the Fire and Safety/Diversified Products segment recorded sales of $114 million, down 1% year over year.
The FMT segment contributed 43% to the quarterly sales, while HST accounted for 35% and Fire & Safety/Diversified Products represented 22% of sales.
Margins
Operating margin in the quarter improved 70 basis points to 19.2%, driven by increase in productivity and cost-cutting initiatives. Earnings before Interest, Taxes Depreciation and Amortization (EBITDA) stood at $119 million, up 11% from the year-ago period.
The FMT segment reported operating margin of 24.9%, up 280 basis points year over year. The segment’s margin was highly influenced by the company’s high productivity and high volumes.
The HST segment’s operating margin came in at 19.1%, up 250 basis points from the year-ago quarter due to increased production and cost reductions.
The Fire and Safety segment recorded an operating margin of 20.7%, down 270 basis points from the year-ago quarter. The year-over-year decline was primarily attributable to unfavorable product mix and expenses.
Balance Sheet and Cash Flow
As of Jun 30, 2013, IDEX Corporation had cash and cash equivalents of $374.5 million, while long-term debt increased to $811.0 million.
Cash flow from operating activities aggregated $109.3 million in the reported quarter compared with $80.7 million in the year-ago quarter, representing a 35% year-over-year increase. Free cash flow stood at $103.4 million in the reported quarter versus $70.8 million in the year-ago period – a remarkable 46% year-over-year improvement. IDEX Corporation repurchased 956,000 shares for $51 million in the reported quarter, bringing its year-to-date tally to 1.6 million shares for $85 million.
Outlook
Despite a volatile macroeconomic environment, IDEX Corporation remains bullish about both its top- and bottom-line growth. For the third quarter of 2013, earnings are expected in the range of 72 to 74 cents per share. For full year 2013, the company increased its earnings guidance to the range of $2.93 to $2.98 from its earlier projection of $2.85 to $2.95 per share.
IDEX Corporation continues to fund organic growth while pursuing strategic acquisitions, increasing dividends and remaining active on share repurchases. We remain encouraged with the positive outlook of the company.
IDEX Corporation currently has a Zacks Rank #4 (Sell). Other stocks that look promising in the industry and are worth considering include Chart Industries Inc. (GTLS), Dover Corporation (DOV) and Gardner Denver Inc. (GDI), each carrying a Zacks Rank #2 (Buy).
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