Colfax Corporation reported better-than-expected results for fourth-quarter 2020, with earnings surpassing estimates by 4.1%. This was the company’s 21st consecutive quarter of impressive bottom-line results. However, the quarter’s sales lagged the Zacks Consensus Estimate by 0.3%.

The machinery company’s adjusted earnings in the reported quarter were 51 cents per share, surpassing the consensus estimate of 49 cents. However, the bottom line declined 16.4% from the year-ago figure of 61 cents on weak sales generation and a fall in margin.

For 2020, the company’s adjusted earnings were $1.40 per share, surpassing the Zacks Consensus Estimate of $1.38. However, the results were 30.3% below the year-ago figure of $2.01.

Revenue Details

In the quarter under review, Colfax’s net sales were $828.1 million, reflecting a year-over-year decline of 6.8%. The results suffered from a 7.4% decline in the existing businesses (due to the pandemic’s impact on demand) and a 0.2% impact of forex woes. However, acquisitions had a positive impact of 0.8% in the quarter.

Also, the company’s revenues lagged the Zacks Consensus Estimate of $830.2 million.

Notably, its net sales increased 3% from the previous quarter’s figure.

The company currently reports under two business segments — Fabrication Technology and Medical Technology. The segmental information is briefly discussed below:

Revenues from Fabrication Technology totaled $518.6 million, declining 6.5% year over year. The results suffered from a 5.2% decline in existing businesses and a 1.3% adverse impact of forex woes.

Revenues from Medical Technology totaled $309.5 million, reflecting a year-over-year decline of 7.3%. The results suffered from an 11% fall in existing businesses, partially offset by a 7.3% gain from acquired assets and a 1.6% positive impact of movements in foreign currencies.

For 2020, the company’s net sales were $3.1 billion, decreasing 12.2% from the previous year. Also, the sales lagged the Zacks Consensus Estimate of $3.07 billion.

Margin Profile

In the quarter under review, Colfax’s cost of sales declined 3.9% year over year to $473.4 million. Selling, general and administrative expenses decreased 1.6% year over year to $281.4 million. It represented 34% of revenues.

Adjusted earnings before interest, tax and amortization (EBITA) in the quarter under review declined 15.7% year over year to $112.8 million. Also, the adjusted EBITA margin decreased 1.5 percentage points year over year to 13.6%. Interest expenses in the quarter declined 21.6% year over year to $25.6 million. Adjusted tax rate in the quarter was 18%.

Balance Sheet and Cash Flow

Exiting the fourth quarter, Colfax had cash and cash equivalents of $97.1 million, up 46.2% from the previous quarter’s figure of $66.4 million. Its long-term debt balance was up 0.6% sequentially to $2,204.2 million.

Notably, the company repaid borrowings of $939 million under its revolving credit facilities and others in 2020. Further, it raised $860.7 million in cash through the same means.

In 2020, Colfax generated net cash of $301.9 million from operating activities as compared with $130.9 million in the previous year. Capital used for purchasing property, plant and equipment was $114.8 million, reflecting a year-over-year decline of 8.5%.

Outlook

Colfax anticipates a healthy increase in sales and earnings in 2021. It also expects the cash flow position to be impressive in the year. It anticipates recovering demand to aid the top-line performance.

Revenues are expected to increase 15-18% year over year in 2021. On a segmental basis, sales for Medical Technology are expected to be up 21-24% (or 14-16% on an organic basis), while the same for Fabrication Technology is expected to increase 11-14% (or 9-12% organically).

Adjusted earnings per share are expected to be $2.00-$2.15 per share, up from $1.40 in 2020. Free cash flow is will be at least $250 million for the year.

For the first quarter of 2021, adjusted earnings per share are predicted to be 35-40 cents per share.