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AMETEK (AME) Beats Q3 Earnings Estimates, Raises 2017 View

AMETEK, Inc. AME reported better-than-expected third-quarter 2017 results with revenues and earnings surpassing the Zacks Consensus Estimate.

Earnings of 66 cents per share beat the consensus mark by 4 cents. Earnings were up 1.5% sequentially and 17.9% year over year.

The company’s revenues were positively impacted by robust organic growth and input from recently completed acquisitions.

The solid performance was driven by robust organic sales growth, operational-excellence initiatives and contributions from recently completed acquisitions. This, in combination with a strong portfolio of differentiated businesses, is expected to help the company post better results, going forward.

The company continues to reap the benefits from the execution of its four core growth strategies of operational excellence, global market expansion, investments in product development and strategic acquisitions.

We observe that AMETEK's shares have gained 38.8% year to date, underperforming its industry’s rally of 48%.

Let’s check out the numbers.

Total Revenue

AMETEK reported revenues of $1.08 billion, up 1.9% sequentially and 14.8% year over year. Revenues came ahead of the Zacks Consensus Estimate of $1.04 billion.

The company has two operating segments — Electronic Instruments Group (EIG) and Electromechanical Group (EMG) — which accounted for 62% and 38%, respectively, of total revenues in the second quarter.

Revenues by Segment

Revenues of EIG increased 2.1% sequentially and 15.9% on a year-over-year basis to $671.6 million. The year-over-year increase was due to robust broad-based organic growth and contribution from recent acquisitions of MOCON and Rauland.

EMG sales were up 1.5% sequentially and 13% on a year-over-year basis to $413.2 million. The year-over-year improvement was primarily due to solid organic growth and contribution from Laserage acquisition.

AMTEK, Inc. Revenue (TTM)

Operating Performance

AMETEK’s gross margin for the quarter was 33.7%, down 151 basis points (bps) year over year. The company reported operating income of $232.8 million, higher than the year-ago quarter figure of $201.1 million.

Selling, general and administrative expenses of $132.3 million increased 16.9% year over year. Also, as a percentage of sales, selling, general and administrative expenses increased slightly year over year. Operating margin of 21.5% was up 18 bps year over year.

Net Income

AMETEK’s net income was $153.5 million compared with $150.5 million in the previous quarter and $130.7 million in the year-ago period.

Earnings of 66 cents per share were higher than 65 cents in the prior quarter and 56 cents reported in the year-ago quarter.

Balance Sheet

Cash and cash equivalents balance at the end of the third quarter was $736.4 million, increasing from $516.5 million in the previous quarter. Long-term debt was $1.92 billion, down from $2.13 billion in the previous quarter.

Outlook

For the fourth quarter, management expects revenues to be up low-double digits year over year. Earnings are expected to be in the range of 66–67 cents per share, up 14–16% year over year. For the fourth quarter, the Zacks Consensus Estimate is pegged at 65 cents.

For 2017, management raised its revenue growth forecast to low-double digits from the previous expectation of high-single digits over 2016. Earnings are expected to be in the range of $2.57–$2.58 per share, up 12% year over year from its previous expectations of $2.46 to $2.52. The Zacks Consensus Estimate for 2017 is pegged at $2.52.

Zacks Rank and Other Stocks to Consider

AMETEK has a Zacks Rank #3 (Hold).

Better-ranked stocks in the broader technology sector are NVIDIA Corporation NVDA, Lam Research Corporation LRCX and Micron Technology Inc. MU, all sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth for NVIDIA, Lam Research and Micron is projected to be 11.2%, 14.9% and 10%, respectively.

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