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Why Is Ametek (AME) Up 0.3% Since Last Earnings Report?

It has been about a month since the last earnings report for Ametek (AME). Shares have added about 0.3% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Ametek due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

AMETEK Beats Q1 Earnings Estimates

AMETEK reported first-quarter 2023 adjusted earnings of $1.49 per share, beating the Zacks Consensus Estimate by 5.7%. The bottom line rose 12% on a year-over-year basis.

Net sales of $1.59 billion came in ahead of the Zacks Consensus Estimate of $1.53 billion. The top line rose 10% year over year.

Top-line growth was driven by solid momentum across the Electronic Instruments Group (EIG) and Electromechanical Group (EMG) segments.

AMETEK’s proper execution of the four core growth strategies, including operational excellence, global market expansion, investments in product development and acquisitions, is expected to continue aiding financial growth in the near and long term. The AMETEK Growth Model is likely to continue driving AME’s business performance.

Segments in Detail

EIG (70% of total sales): AMETEK generated sales of $1.12 billion from the segment, reflecting growth of 13% from the year-ago quarter’s level.

EMG (30% of sales): The segment generated $479.9 million in sales in the first quarter, which improved by 2% on a year-over-year basis.

Operating Details

For the first quarter, operating expenses were $1.2 billion, up 7.8% year over year. The figure contracted by 120 basis points (bps) from the year-ago quarter’s level as a percentage of net sales to 74.6%.

Consequently, the operating margin was 25.4%, which expanded 120 bps from the year-ago quarter’s figure.

The operating margin for EIG expanded 290 bps year over year to 27.7% and that of EMG contracted 210 bps from the year-ago quarter’s level to 25.1%.

Balance Sheet

As of Mar 31, 2023, cash and cash equivalents were $399.9 million, up from $345.4 million as of Dec 31, 2022.

Inventories amounted to $1.12 billion at the end of the first quarter compared with $1.04 billion at the end of the prior quarter.

Long-term debt was $2.18 billion in the reported quarter, up from $2.16 billion in the prior quarter.

Guidance

For second-quarter 2023, management expects sales growth in the mid- to high-single digits from the year-ago quarter’s reported figure.

AMETEK expects adjusted earnings of $1.49-$1.51 per share, suggesting growth of 8-9% from the year-ago quarter’s reported number.

For 2023, AME expects sales growth in the mid- to high-single digits from the 2022 level.

Further, management raised the guidance for adjusted earnings from $5.84-$6.00 to $5.96-$6.10, suggesting growth of 5-7% from the 2022 reported level.

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How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates.

VGM Scores

At this time, Ametek has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Ametek has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.

Performance of an Industry Player

Ametek is part of the Zacks Electronics - Testing Equipment industry. Over the past month, Teradyne (TER), a stock from the same industry, has gained 8.7%. The company reported its results for the quarter ended March 2023 more than a month ago.

Teradyne reported revenues of $617.53 million in the last reported quarter, representing a year-over-year change of -18.3%. EPS of $0.55 for the same period compares with $0.98 a year ago.

Teradyne is expected to post earnings of $0.65 per share for the current quarter, representing a year-over-year change of -46.3%. Over the last 30 days, the Zacks Consensus Estimate has changed -1.2%.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Teradyne. Also, the stock has a VGM Score of F.

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AMETEK, Inc. (AME) : Free Stock Analysis Report

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