On Oct 13, Zacks Investment Research updated the research report on industrial goods manufacturer IDEX Corporation IEX.
Headquartered in Lake Forest, IL, IDEX specializes in a diverse range of applications such as fluid and metering technologies; health and science technologies; and fire, safety and other products built to customer specifications.
With operations across five continents, IDEX’s performance is exposed to the adverse impact of macroeconomic cycles in the U.S. and international markets. Given its global presence, the company also faces unfavorable foreign currency movements, impacting its bottom-line growth. In addition, the company’s business strategy hinges on acquiring companies and making investments that complement its existing businesses. These acquisitions entail huge integration costs which often become a drag on the profitability of IDEX.
The company operates in a highly competitive industry. Maintaining and improving its competitive position entails continued investment in manufacturing, engineering, quality standards, marketing, customer service and support and distribution networks. This involves huge recurring R&D expenses that increase its operating costs. This also reduces IDEX’s price control over its products, which often leads to loss of market share, decline in top-line growth and lower operating margin.
To add to the woes, IDEX procures substantial amount of raw materials and components from suppliers across the globe, which make it susceptible to various operating risks. These include the availability and prices for raw materials, curtailment or change in parts and components, interruptions in production by suppliers, changes in exchange rates and prevailing price levels. These affect its cash flow and restrict its growth momentum to some extent.
IDEX is striving to counter this muted growth environment by improving productivity and conducting heavy restructuring initiatives across its portfolio. At the same time, IDEX aims to exploit suitable acquisition opportunities to fuel its inorganic growth momentum. These acquisitions expand its geographic reach, fill technology gaps and strengthen its foothold in the existing markets, while expanding its product lines.
The company also aims to increase its market exposure and improve sales mix by continually developing new products. With a flexible yet disciplined focus on cost and productivity, it intends to optimize the cost structure, increase its competitiveness and reallocate resources to improve profitability in the future.
IDEX currently has a Zacks Rank #4 (Sell). Some better-ranked stocks in the industry include Barnes Group Inc. B, Altra Industrial Motion Corp. AIMC and Chart Industries Inc. GTLS, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Barnes has a long-term earnings growth expectation of 9% and is currently trading at a forward P/E of 15.6x.
Altra Industrial has a positive earnings surprise history with an average of 9.2% in the trailing four quarters, comprehensively beating estimates in each quarter.
Chart Industries has a long-term earnings growth expectation of 20% and is currently trading at a forward P/E of 38.7x.
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