Colfax Q1 Earnings Up Y/Y, Boosts View

Manufacturing and engineering company, Colfax Corporation (CFX) reported adjusted earnings per share of 43 cents in first-quarter 2014, reflecting year-over-year growth of 65.4%. However, the bottom-line result fell short of the Zacks Consensus Estimate of 44 cents.

Revenue

Colfax generated net sales of $1,054.3 million in first-quarter 2014, reflecting an increase of 11.3% year over year. The improvement can be attributed to a 5.6% contribution from existing businesses and a 9% gain from acquisitions, offset partially by a 3.3% negative impact from foreign currency translations.

The top-line result surpassed the Zacks Consensus Estimate of $1,032.0 million.

Total orders in the quarter were $583.4 million, up 16.2% year over year, while backlog at the end of the quarter was $1,592.0 million, compared with $1,438.5 million at the end of first-quarter 2013.

Colfax generates revenues under two heads, which are briefly discussed below:

Revenues generated from the Gas and Fluid Handling segment were $573.9 million, up 35.0% year over year. Fabrication Technology revenues declined 8.0% year over year to $480.4 million.

Margins

Colfax’s cost of sales in first-quarter 2014 increased 11% and represented 69.1% of total revenue, down 20 basis points (bps) year over year. Gross margin in the quarter was 30.9%, up 20 bps year over year. Selling, general and administrative (SG&A) expenses, as a percentage of revenue, were at 22.0%, against 22.6% in the year-ago quarter.

Adjusted operating income margin expanded 60 basis points year over year to 8.9% in the quarter.

Balance Sheet/ Cash Flow

Exiting first-quarter 2014, Colfax had cash and cash equivalents of $482.2 million, up from $311.3 million recorded in the year-ago quarter. Long-term debt was at $1.1 billion versus $1.5 billion in the previous quarter.

During the quarter, Colfax used $67.0 million of cash for operating activities, up from $13.4 million used in the year-ago quarter. Capital spent on purchase of fixed assets was $12.6 million, down 29.9% year over year.

Subsequent to the end of first-quarter 2014, Colfax on Apr 14, announced the completion of the acquisition of Victor Technologies Holdings, Inc. from Irving Place Capital for $947.3 million.

Outlook

Accounting for contributions from the Victor acquisition, Colfax increased its sales guidance for 2014 to $4.85−$4.99 billion range from the previous projection of $4.5−$4.625 billion range.

Tax rate is expected to be within the 29−30% range, while interest expense is predicted to be nearly $58 million.

Adjusted earnings per share are estimated within the $2.45−$2.70 range, up compared with the prior expectation of $2.40−$2.65. Including one-time charges of 49 cents, GAAP earnings per share are anticipated within the $1.96−$2.21 range. This reflects a decline from the previous range of $2.14−$2.34.

Colfax currently has a market capitalization of $7.5 billion and currently holds a Zacks Rank #2 (Buy). Some better-ranked stocks in the industry, with a Zacks Rank #1 (Strong Buy) are Middleby Corp. (MIDD), Kadant Inc. (KAI) and Sun Hydraulics Corp. (SNHY).

Read the Full Research Report on CFX
Read the Full Research Report on SNHY
Read the Full Research Report on KAI
Read the Full Research Report on ^MIDD


Zacks Investment Research