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Here's Why You Should Avoid Investing in IDEX (IEX) for Now
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IDEX Corporation (IEX - Free Report) has failed to impress investors with its recent operational performance due to weakness across its businesses and increasing selling, general and administrative expenses. Also, given the company’s extensive international presence, foreign currency headwind is an added uncertainty.
Based 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. IEX currently carries a Zacks Rank #4 (Sell). Shares of the company have lost 10.8% in the past year against the industry’s 21.4% growth.
Image Source: Zacks Investment Research
Let’s discuss the factors that may continue taking a toll on the firm.
Factors Affecting IDEX
Business Weakness: The company is seeing weaker volumes in the Health & Science Technologies (HST) and Fluid & Metering Technologies (FMT) segments. Softness in the analytical instrumentation, life sciences and semiconductor markets is affecting the HST segment. In the second quarter of 2024, the segment’s revenues declined 11%, following a 12% decline in the preceding quarter.
The FMT segment is experiencing weakness in the industrial markets owing to non-repeat projects. Also, the agricultural businesses continue to be cyclically down, which is acting as a headwind to the segment’s performance. The FMT segment’s revenues decreased 2% year over year in the second quarter. Amid these challenges, the company expects organic revenues to decrease 1-2% year over year in 2024.
Rising Expenses: The escalating selling, general and administrative expenses are a threat to IDEX’s bottom line. The metric grew 4.9% year over year in the second quarter. Increasing amortization expenses, and professional services and discretionary spending are raising the selling, general and administrative expenses. As a percentage of sales, it increased 200 bps to 22.6% in the same period. This upward trajectory follows a pattern of expense growth in the preceding three quarters, with increases of 2.9, 2.7% and 2.5%, respectively.
Forex Woes: IDEX’s international presence keeps it exposed to the risk of adverse currency fluctuations. This is because a strengthening U.S. dollar is likely to require the company to either raise prices or contract profit margins in locations outside the United States. Thus, adverse currency movements are a worry. In the second quarter, foreign currency translation hurt sales by 1%.
Southbound Estimate Revisions: In the past 60 days, the Zacks Consensus Estimate for IEX’s 2024 earnings has been revised 4.6% downward.
Stocks to Consider
Better-ranked companies from the same space are discussed below.
AIT delivered a trailing four-quarter average earnings surprise of 8.2%. In the past 60 days, the Zacks Consensus Estimate for Applied Industrial’s fiscal 2025 earnings has remained steady.
Crane Company (CR - Free Report) presently carries a Zacks Rank of 2. The company delivered a trailing four-quarter average earnings surprise of 11.2%.
In the past 60 days, the Zacks Consensus Estimate for CR’s 2024 earnings has increased 1.6%.
Ferguson Enterprises Inc. (FERG - Free Report) currently carries a Zacks Rank of 2. FERG delivered a trailing four-quarter average earnings surprise of 2.6%.
In the past 60 days, the consensus estimate for Ferguson’s fiscal 2025 earnings has increased 0.3%.
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Here's Why You Should Avoid Investing in IDEX (IEX) for Now
IDEX Corporation (IEX - Free Report) has failed to impress investors with its recent operational performance due to weakness across its businesses and increasing selling, general and administrative expenses. Also, given the company’s extensive international presence, foreign currency headwind is an added uncertainty.
Based 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. IEX currently carries a Zacks Rank #4 (Sell). Shares of the company have lost 10.8% in the past year against the industry’s 21.4% growth.
Image Source: Zacks Investment Research
Let’s discuss the factors that may continue taking a toll on the firm.
Factors Affecting IDEX
Business Weakness: The company is seeing weaker volumes in the Health & Science Technologies (HST) and Fluid & Metering Technologies (FMT) segments. Softness in the analytical instrumentation, life sciences and semiconductor markets is affecting the HST segment. In the second quarter of 2024, the segment’s revenues declined 11%, following a 12% decline in the preceding quarter.
The FMT segment is experiencing weakness in the industrial markets owing to non-repeat projects. Also, the agricultural businesses continue to be cyclically down, which is acting as a headwind to the segment’s performance. The FMT segment’s revenues decreased 2% year over year in the second quarter. Amid these challenges, the company expects organic revenues to decrease 1-2% year over year in 2024.
Rising Expenses: The escalating selling, general and administrative expenses are a threat to IDEX’s bottom line. The metric grew 4.9% year over year in the second quarter. Increasing amortization expenses, and professional services and discretionary spending are raising the selling, general and administrative expenses. As a percentage of sales, it increased 200 bps to 22.6% in the same period. This upward trajectory follows a pattern of expense growth in the preceding three quarters, with increases of 2.9, 2.7% and 2.5%, respectively.
Forex Woes: IDEX’s international presence keeps it exposed to the risk of adverse currency fluctuations. This is because a strengthening U.S. dollar is likely to require the company to either raise prices or contract profit margins in locations outside the United States. Thus, adverse currency movements are a worry. In the second quarter, foreign currency translation hurt sales by 1%.
Southbound Estimate Revisions: In the past 60 days, the Zacks Consensus Estimate for IEX’s 2024 earnings has been revised 4.6% downward.
Stocks to Consider
Better-ranked companies from the same space are discussed below.
Applied Industrial Technologies, Inc. (AIT - Free Report) currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
AIT delivered a trailing four-quarter average earnings surprise of 8.2%. In the past 60 days, the Zacks Consensus Estimate for Applied Industrial’s fiscal 2025 earnings has remained steady.
Crane Company (CR - Free Report) presently carries a Zacks Rank of 2. The company delivered a trailing four-quarter average earnings surprise of 11.2%.
In the past 60 days, the Zacks Consensus Estimate for CR’s 2024 earnings has increased 1.6%.
Ferguson Enterprises Inc. (FERG - Free Report) currently carries a Zacks Rank of 2. FERG delivered a trailing four-quarter average earnings surprise of 2.6%.
In the past 60 days, the consensus estimate for Ferguson’s fiscal 2025 earnings has increased 0.3%.