Machinery company Colfax Corporation CFX reported better-than-expected results in first-quarter 2017, with earnings per share and revenues surpassing their respective estimates by 16.67% and 2.81%.
The company’s adjusted earnings came in at 35 cents per share, above the Zacks Consensus Estimate of 30 cents. Also, the bottom line grew 16.67% above the year-ago tally of 30 cents.
Net sales in the quarter totaled $844.9 million, beating the Zacks Consensus Estimate of $822 million. However, the top line decreased roughly 3.6% from the year-ago tally of $876.8 million, primarily due to 4.1% fall in existing businesses and 0.2% negative impact from adverse foreign currency movements, partially offset by 0.7% gain from acquired assets.
Segmental Revenues
Colfax reports its net sales under two heads/segments. The segmental results are briefly discussed below:
Revenues from Gas and Fluid Handling totaled $384.9 million, down 11% year over year. The decline was triggered by 9.3% fall in the existing businesses and 1.7% adverse impact from foreign currency translations.
Organically, sales declined 27.1% in oil, gas & petrochemical, 10.1% in power generation and 7.1% in general industrial & other end markets. These negatives were partially offset by 40.4% gain in mining and 10.2% gain in marine end markets.
The segment’s orders were worth $445.2 million at the end of the quarter, up 9.6% year over year. Backlog was $1,084.7 million.
Revenues from Fabrication Technology grew 3.6% year over year to $460 million due to 1.8% positive impact from price/mix, 1.4% gain from acquired assets and 1.1% positive impact from foreign currency translations, partially offset by 0.7% decline in volumes.
Margins
In the quarter, Colfax’s cost of sales decreased 5.2% year over year, representing 66.9% of net sales compared with 68% in the year-ago quarter. Gross margin increased 110 basis points (bps) year over year to 33.1%. Selling, general and administrative expenses, roughly 24.4% as a percentage of revenues, declined 3.9% year over year.
Adjusted operating income grew 10.9% year over year while margin grew 120 bps to 8.7%.
Balance Sheet and Cash Flow
Exiting the first quarter, Colfax had cash and cash equivalents of $207.8 million, down from $221.7 million recorded at previous quarter end. Long-term debt balance was down 3.3% sequentially to $1,244.9 million.
In the quarter, the company generated net cash of $40.4 million from its operating activities, up from $15.5 million generated in the year-ago quarter. Capital spending totaled $11.7 million, decreasing 23.9% year over year.
Outlook
For 2017, Colfax increased its adjusted earnings guidance to $1.60−$1.75 per share from the previous projection of $1.55−$1.70. Also, the company announced that it is on track to deliver roughly $50 million in cost savings from its restructuring efforts.