IDEX Corporation’s (IEX Quick QuoteIEX - Free Report) third-quarter 2023 adjusted earnings of $2.12 per share surpassed the Zacks Consensus Estimate of adjusted earnings of $1.89. On a year-over-year basis, the bottom line decreased approximately 1% from the year-ago quarter’s figure of earnings of $2.02 per share due to the lower effective tax rate.

Earnings for the third quarter exceeded management’s projection of $1.60-$1.65 per share.

Revenue Details

In the quarter under review, IDEX’s net sales of $793.4 million outperformed the Zacks Consensus Estimate of $790 million. However, the top line decreased 3.7% year over year. Organic sales in the quarter decreased 6% year over year, lower than the 8-7% decline expected by IEX. The exit of a COVID testing application in 2022, which did not reoccur in 2023, impacted sales by 2%. Acquisitions/divestitures boosted sales 3%. Foreign currency translation left a positive 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 $301.1 million, decreasing 2.1% year over year. Our estimate for segmental revenues was $295 million. Organic sales were down 1%. However, acquisitions/divestitures left a negative impact of 2% while foreign currency translation left a positive impact of 1%.

Revenues from the Health & Science Technologies segment totaled $313.2 million, reflecting a year-over-year decline of 9.2%. Our estimate for segmental revenues was $330 million. Organic sales in the quarter declined 15% year over year, while acquired assets boosted sales 10%. The exit of a COVID testing application in 2022, which did not reoccur in 2023, impacted sales by 5%. Foreign currency translation left a positive impact of 1%.

Revenues from the Fire & Safety/Diversified Products segment totaled $180.6 million, rising 4.8% year over year. Our estimate for segmental revenues was $166.9 million. The results were aided by a 3% increase in organic sales. Foreign currency translation left a positive impact of 2%.

Margin Profile

In the quarter under review, IDEX’s cost of sales increased 0.4% year over year to $443.8 million. The gross profit was $349.6 million, down 8.4% year over year, while the gross margin was 44.1% compared with 46.3% reported in the year-ago quarter.

Selling, general and administrative expenses increased 2.5% year over year to $165.9 million. Adjusted EBITDA in the quarter under review decreased 2.6% year over year to $225.5 million. The adjusted EBITDA margin decreased 30 bps year over year to 28.4%.

The operating income was $179.6 million, down 11.2% year over year, whereas the margin was 22.6%, down 190 bps year over year. Interest expenses in the quarter increased 42.7% year over year to $13.7 million.

Balance Sheet and Cash Flow

While exiting the third quarter, IDEX’s cash and cash equivalents were $562.7 million compared with $430.2 million recorded at the end of fourth-quarter 2022. Long-term borrowings were $1,320.8 million compared with $1,468.7 million recorded at the end of fourth-quarter 2022.

In the first nine months of 2023, IDEX generated net cash of $515.7 million from operating activities, increasing 32.2% from the year-ago period. Capital used for purchasing property, plant and equipment was $68.3 million compared with $48.0 million in December 2022. Free cash flow was $447.4 million, up 30.8% year over year.

IEX paid out dividends totaling $142.3 million, up 7.6% year over year. The company repurchased common stock worth $1.1 million in the quarter.

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

Outlook

For fourth-quarter 2023, IEX predicts earnings to be $1.50-$1.55 per share and an 8-9% decline in organic sales from the respective year-ago readings.

IDEX anticipates adjusted earnings to be $1.74-$1.79 per share for fourth-quarter 2023. The Zacks Consensus Estimate for the same stands at $1.80 per share.

The company has raised its guidance for 2023. IDEX now anticipates adjusted earnings to be $8.13-$8.18 per share compared with adjusted earnings of $7.90-$8.00 per share anticipated earlier. The consensus estimate for the same stands at $7.97 per share.

Full-year earnings are predicted to be $7.91-$7.96 per share compared with $6.80-$6.90 per share expected earlier.

Organic sales are predicted to decline 1-2% for 2023.

Zacks Rank & Stocks to Consider

IDEX currently carries a Zacks Rank #3 (Hold). Some better-ranked companies from the Industrial Products sector are discussed below:

Applied Industrial Technologies, Inc. (AIT Quick QuoteAIT - Free Report) presently sports a Zacks Rank #1 (Strong Buy) and a trailing four-quarter earnings surprise of 15%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.

AIT’s earnings estimates have increased 1.3% for fiscal 2024 (ending June 2024) in the past 60 days. Shares of Applied Industrial have risen 30.4% in the past year.

Axon Enterprise, Inc. (AXON Quick QuoteAXON - Free Report) currently carries a Zacks Rank #2 (Buy). The company delivered a trailing four-quarter earnings surprise of approximately 60.2%, on average.

In the past 60 days, estimates for Axon’s earnings have remained steady for 2023. The stock has soared 51.7% in the past year.

Caterpillar Inc. (CAT Quick QuoteCAT - Free Report) presently carries a Zacks Rank of 2. CAT’s earnings surprise in the last four quarters was 18.5%, on average.

In the past 60 days, estimates for Caterpillar’s 2023 earnings have increased 1.5%. The stock has gained 24.4% in the past year.