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Here's Why You Should Retain IDEX (IEX) in Your Portfolio
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IDEX Corporation (IEX - Free Report) is well-poised for growth in the coming quarters, courtesy of its businesses and accretive acquisitions. The company's efforts to reward its shareholders handsomely add to its appeal.
Headquartered in Lake Forest, IL, IDEX is an applied solutions company that 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. Over the past six months, this Zacks Rank #3 (Hold) company has gained 0.9%.
Image Source: Zacks Investment Research
Let’s discuss the factors that should influence investors to retain this company for the time being.
Business Strength: IDEX is benefiting from the strong performance of the Fire & Safety/Diversified Products (“FSDP”) segment, driven by increasing orders from industrial and municipal markets. The company's focus on reducing excess inventory and improving overall productivity has been proving beneficial for the segment. Strong demand for products in the fire and safety and Band-It businesses is driving the FSDP segment’s revenues. Also, dispensing project wins in emerging markets have been a tailwind.
Expansion Efforts: The company solidified its product portfolio and leveraged business opportunities through asset additions. Acquired assets boosted its sales by 1% in the first quarter of 2024. In December 2023, IDEX acquired advanced material science solutions provider STC Material Solutions. This acquisition expanded its expertise in material sciences and offered significant opportunities to collaborate with other IDEX-critical components businesses on comprehensive solution sets for customers. This buyout expanded the company’s Health & Science Technologies (“HST”) segment.
The acquisition of Iridian Spectral (May 2023) expanded IDEX’s array of optical technology offerings, augmenting its HST segment. Its November 2022 acquisition of Muon Group, which was also incorporated within the HST segment, further expanded its precision technology offerings. Commercial synergy potential from the combined entities is expected to boost offerings for new and existing customers. The company anticipates buyout synergies to boost sales by approximately 1% in 2024.
Rewards to Shareholders: IDEX’s measures to reward its shareholders through dividend payments are noteworthy. In the first three months of 2024, its dividend payments totaled $48.5 million (up 6.6% year over year). The current quarterly dividend rate is 69 cents per share (a hike of 7.8% was announced in May 2024). In 2023, the company distributed dividends of $190.7 million.
Downsides
Segmental Weakness: IDEX is seeing weaker volumes in the HST and Fluid & Metering Technologies (“FMT”) segments. Softness in the analytical instrumentation, life sciences and semiconductor markets due to inventory recalibration is affecting the HST segment. The FMT segment is experiencing weakness in the industrial markets owing to non-repeat projects and decreasing backlog levels. Also, the agricultural businesses continue to be cyclically down, which is also acting as a headwind for the segment’s performance.
Rising Expenses: The escalating selling, general and administrative expenses are a threat to IDEX’s bottom line. The metric grew 2.9% year over year in the first quarter of 2024. Amortization expenses are raising the selling, general and administrative expenses. As a percentage of sales, it increased 210 bps to 24.4% in the same period. This upward trajectory follows a pattern of expense growth in the preceding three quarters, with increases of 2.7%, 2.5% and 4.1%, respectively.
Stocks to Consider
Some better-ranked companies from the Industrial Products sector are discussed below:
The Zacks Consensus Estimate for AIT’s fiscal 2024 earnings has improved 0.9% in the past 60 days. The stock has risen 12.1% in the past six months.
Brady Corporation (BRC - Free Report) presently carries a Zacks Rank #2 (Buy) and has a trailing four-quarter earnings surprise of 6.7%, on average.
The consensus estimate for BRC’s fiscal 2024 earnings has increased 3.3% in the past 60 days. Shares of Brady have gained 11.9% in the past six months.
Crane Company (CR - Free Report) presently carries a Zacks Rank of 2. CR delivered a trailing four-quarter earnings surprise of 15.2%, on average.
The Zacks Consensus Estimate for CR’s 2024 earnings has increased 0.8% in the past 60 days. Its shares have gained 34.6% in the past six months.
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Here's Why You Should Retain IDEX (IEX) in Your Portfolio
IDEX Corporation (IEX - Free Report) is well-poised for growth in the coming quarters, courtesy of its businesses and accretive acquisitions. The company's efforts to reward its shareholders handsomely add to its appeal.
Headquartered in Lake Forest, IL, IDEX is an applied solutions company that 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. Over the past six months, this Zacks Rank #3 (Hold) company has gained 0.9%.
Image Source: Zacks Investment Research
Let’s discuss the factors that should influence investors to retain this company for the time being.
Business Strength: IDEX is benefiting from the strong performance of the Fire & Safety/Diversified Products (“FSDP”) segment, driven by increasing orders from industrial and municipal markets. The company's focus on reducing excess inventory and improving overall productivity has been proving beneficial for the segment. Strong demand for products in the fire and safety and Band-It businesses is driving the FSDP segment’s revenues. Also, dispensing project wins in emerging markets have been a tailwind.
Expansion Efforts: The company solidified its product portfolio and leveraged business opportunities through asset additions. Acquired assets boosted its sales by 1% in the first quarter of 2024. In December 2023, IDEX acquired advanced material science solutions provider STC Material Solutions. This acquisition expanded its expertise in material sciences and offered significant opportunities to collaborate with other IDEX-critical components businesses on comprehensive solution sets for customers. This buyout expanded the company’s Health & Science Technologies (“HST”) segment.
The acquisition of Iridian Spectral (May 2023) expanded IDEX’s array of optical technology offerings, augmenting its HST segment. Its November 2022 acquisition of Muon Group, which was also incorporated within the HST segment, further expanded its precision technology offerings. Commercial synergy potential from the combined entities is expected to boost offerings for new and existing customers. The company anticipates buyout synergies to boost sales by approximately 1% in 2024.
Rewards to Shareholders: IDEX’s measures to reward its shareholders through dividend payments are noteworthy. In the first three months of 2024, its dividend payments totaled $48.5 million (up 6.6% year over year). The current quarterly dividend rate is 69 cents per share (a hike of 7.8% was announced in May 2024). In 2023, the company distributed dividends of $190.7 million.
Downsides
Segmental Weakness: IDEX is seeing weaker volumes in the HST and Fluid & Metering Technologies (“FMT”) segments. Softness in the analytical instrumentation, life sciences and semiconductor markets due to inventory recalibration is affecting the HST segment. The FMT segment is experiencing weakness in the industrial markets owing to non-repeat projects and decreasing backlog levels. Also, the agricultural businesses continue to be cyclically down, which is also acting as a headwind for the segment’s performance.
Rising Expenses: The escalating selling, general and administrative expenses are a threat to IDEX’s bottom line. The metric grew 2.9% year over year in the first quarter of 2024. Amortization expenses are raising the selling, general and administrative expenses. As a percentage of sales, it increased 210 bps to 24.4% in the same period. This upward trajectory follows a pattern of expense growth in the preceding three quarters, with increases of 2.7%, 2.5% and 4.1%, respectively.
Stocks to Consider
Some better-ranked companies from the Industrial Products sector are discussed below:
Applied Industrial Technologies, Inc. (AIT - Free Report) presently sports a Zacks Rank #1 (Strong Buy). It has a trailing four-quarter average earnings surprise of 8.2%. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for AIT’s fiscal 2024 earnings has improved 0.9% in the past 60 days. The stock has risen 12.1% in the past six months.
Brady Corporation (BRC - Free Report) presently carries a Zacks Rank #2 (Buy) and has a trailing four-quarter earnings surprise of 6.7%, on average.
The consensus estimate for BRC’s fiscal 2024 earnings has increased 3.3% in the past 60 days. Shares of Brady have gained 11.9% in the past six months.
Crane Company (CR - Free Report) presently carries a Zacks Rank of 2. CR delivered a trailing four-quarter earnings surprise of 15.2%, on average.
The Zacks Consensus Estimate for CR’s 2024 earnings has increased 0.8% in the past 60 days. Its shares have gained 34.6% in the past six months.