Last quarter, this industrial machinery company beat analysts’ estimates by $0.03. The company’s expected 5-year annual growth rate is 11.5%.
IDEX Corporation (IEX)
From Argus Weekly Staff Report
We are launching coverage of IDEX Corp. with a BUY rating. This well-managed company has a long record of market outperformance and dividend growth. We think the company—which designs and manufactures fluidics systems and specialty engineered products for a range of industrial end markets, including healthcare, transportation, food, water, and energy—is well positioned for the future.
The company has a strong balance sheet and an experienced management team—two factors that we think are important during the pandemic.
IDEX has three operating segments: Fluid & Metering Technologies (38% of 1Q20 net sales); Health & Science Technologies (38%); and Fire & Safety/Diversified Products (24%). Based on expected sales and margin trends as well as the potential impact of the coronavirus on 2Q and 3Q results, we are establishing a 2020 EPS estimate of $4.68. Our estimate implies an earnings decline of 19% from last year’s $5.80. We expect growth to resume in 2021 and are establishing a preliminary EPS estimate of $5.25.
On a technical basis, prior to the pandemic, the shares had been in a long-term bullish pattern of higher highs and higher lows dating back to 2009. On a fundamental basis, the shares are trading at 29-times our 2021 EPS estimate, near the high end of the historical range of 20-30. Compared to the peer group (DHR, ECL, FTV, ROP), the shares are trading at discount multiples, which we think points to undervaluation. Our dividend discount model renders a 12-month target above $200, which we are lowering to $180 to reflect the uncertainty in the marketplace.
Jim Kelleher, CFA, Argus Weekly Staff Report, argusresearch.com, 212-425-7500, July 9, 2020