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Colfax’s Near & Long-Term Potential Solid: Should You Add?


We have issued an updated research report on machinery company Colfax Corporation CFX on Jun 19. The company specializes in products and services related to gas and fluid handling, and fabrication technology.

Market sentiments have been favoring Colfax for quite some time now, especially after the company reported better-than-expected results in the last four quarters. Over the last one year, shares of this Zacks Rank #2 (Buy) company have yielded 34.31% return, outperforming 31.27% gain recorded by the Zacks categorized Machinery General Industrial industry.

We believe that Colfax has solid long-term growth potential backed by a diversified product portfolio and exposure to emerging markets. Also, inorganic growth strategies have been benefiting it over time, contributing roughly 1.3% and 0.7% to year-over-year sales growth in 2016 and first-quarter 2017, respectively. Also, in Mar 2017, the company agreed to acquire Siemens AG’s Siemens Turbomachinery Equipment GmbH business. This strategic buyout is anticipated to boost the company’s Howden businesses.

In the long term (three to five years), Colfax intends to boost organic growth (CAGR) in the range of 1−2% above Gross Domestic Product and segment margins in the mid-teens level. Also, boosting shareholder value remains a priority for the company.

For 2017, Colfax increased its adjusted earnings guidance to $1.60−$1.75 per share from the previous projection of $1.55−$1.70. The company anticipates benefiting from improving end-market conditions and cost savings from its restructuring efforts.

Driven by such positives, earnings estimates for Colfax have been revised upward in the last 60 days. The Zacks Consensus Estimate for the company increased 3% to $1.71 for 2017 and 5.3% to $2.00 for 2018. The estimates represent year-over-year growth of 9.81% for 2017 and 16.93% for 2018.

Colfax Corporation Price and Consensus

Colfax Corporation Price and Consensus | Colfax Corporation Quote

Other Stocks to Consider

Colfax currently has a $4.88 billion market capitalization. Other stocks worth mentioning in the machinery industry include Kennametal Inc. KMT, Parker-Hannifin Corporation PH and Regal Beloit Corporation RBC. While Kennametal and Parker-Hannifin sport a Zacks Rank #1 (Strong Buy), Regal Beloit carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Kennametal’s earnings estimates for fiscal 2017 and fiscal 2018 were revised upward in the last 60 days. Also, the company’s average earnings surprise for the last four quarters was a positive 6.24%.

Parker-Hannifin’s average earnings surprise for the last four quarters was a positive 14.94%. Also, earnings expectations for fiscal 2017 and fiscal 2018 improved over the past 60 days.

Regal Beloit’s earnings estimates for 2017 and 2018 were revised upward in the last 60 days. Also, the company’s average earnings surprise for the last four quarters was a positive 1.48%.

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