IDEX Corporation’s (IEX Quick QuoteIEX - Free Report) second-quarter 2023 adjusted earnings of $2.18 per share, surpassed the Zacks Consensus Estimate of adjusted earnings of $2.12 per share. On a year-over-year basis, the bottom line increased 7.9% from the year-ago quarter’s figure of $2.02 per share. Healthy segmental results favorably impacted the quarter’s earnings.

Earnings for the second quarter exceeded management’s projection of $2.10-$2.13 per share.

Revenue Details

In the quarter under review, IDEX’s net sales of $846.2 million underperformed the Zacks Consensus Estimate of $847 million. However, the top line increased 6.3% year over year. Organic sales in the quarter increased 3% year over year, in line with approximately 3% growth expected by IEX. Acquired assets boosted sales 4%. Foreign currency translation left a negative impact of 1%.

IEX reports net sales under three business segments, the results of which are discussed below:

Revenues from the Fluid & Metering Technologies segment totaled $325.1 million, increasing 8.4% year over year. Our estimate for segmental revenues was $316.5 million. Organic sales were up 10%. However, acquisitions/divestitures and foreign currency translation left a negative impact of 1% each.

Revenues from the Health & Science Technologies segment totaled $339.5 million, reflecting year-over-year growth of 4.1%. Our estimate for segmental revenues was $357.6 million. Organic sales in the quarter declined 6% year over year, while acquired assets boosted sales 10%.

Revenues from the Fire & Safety/Diversified Products segment totaled $184.8 million, rising 7.9% year over year. Our estimate for segmental revenues was $179.2 million. The results were aided by an 8% increase in organic sales.

Margin Profile

In the quarter under review, IDEX’s cost of sales increased 6.6% year over year to $468.2 million. The gross profit was $378.0 million, up 5.9% year over year, while the gross margin was 44.7%, compared with 44.8% reported in the year-ago quarter.

Selling, general and administrative expenses increased 4.1% year over year to $174.3 million. The same represented 20.6% of revenues. Adjusted EBITDA in the quarter under review increased 9.8% year over year to $240.7 million. The adjusted EBITDA margin increased 90 bps year over year to 28.4%.

The operating income was $200.1 million, up 7.2% year over year, whereas the margin was 23.6%, up 20 bps year over year. Interest expenses in the quarter increased 40% year over year to $13.3 million.

Balance Sheet and Cash Flow

While exiting the second quarter, IDEX’s cash and cash equivalents was $457.0 million, compared with $430.2 million recorded at the end of fourth-quarter 2022. Long-term borrowings were $1,471.5 million, compared with $1,468.7 million recorded at the end of fourth-quarter 2022.

In the first six months of 2023, IDEX generated net cash of $289.1 million from operating activities, increasing 50.6% from the year-ago period. Capital used for purchasing property, plant and equipment was $48.2 million, compared with $31.7 million in December 2022. Free cash flow was $240.9 million, up 50.3% year over year.

IEX paid out dividends totaling $93.9 million, up 8.1% year over year. The company repurchased common stock worth $1 million in the quarter.

IEX spent $110.3 million on acquisitions in the first six months of 2023.

Outlook

For third-quarter 2023, IEX predicts earnings of $1.60-$1.65 per share and 7-8% decline in organic sales from the respective year-ago readings.

IDEX anticipates adjusted earnings of $1.84-$1.89 per share for third-quarter 2023. The Zacks Consensus Estimate for the same stands at $2.18 per share.

The company has lowered its guidance for 2023. IDEX now anticipates adjusted earnings of $7.90-$8.00 per share, compared with $8.25-$8.55 per share anticipated earlier. The midpoint of the guided range of $8.40 per share compares unfavorably with the consensus estimate of $8.51 per share.

Full-year earnings are predicted to be $6.80-$6.90 per share, compared with $7.30-$7.60 per share expected earlier.

Organic sales are predicted to decline 7-8% for 2023.

Zacks Rank & Other Stocks to Consider

IEX currently carries Zacks Rank #2 (Buy). Some other top-ranked companies from the Industrial Products sector are discussed below:

Greif, Inc. (GEF Quick QuoteGEF - Free Report) presently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks.

GEF delivered a trailing four-quarter earnings surprise of 7.7%, on average. GEF’s earnings estimates have increased 13.4% for fiscal 2023 in the past 60 days. Its shares have risen 4.2% in the past year.

A. O. Smith Corporation (AOS Quick QuoteAOS - Free Report) presently carries a Zacks Rank of 2. AOS’ earnings surprise in the last four quarters was 8%, on average.

In the past 60 days, estimates for A. O. Smith’s earnings have increased 0.9% for 2023. The stock has gained 23.1% in the past year.