FARO (NASDAQ:FARO): Strongest Q3 Results from the Inspection Instruments Group
Wrapping up Q3 earnings, we look at the numbers and key takeaways for the inspection instruments stocks, including FARO (NASDAQ:FARO) and its peers.
Measurement and inspection instrument companies may enjoy more steady demand because products such as water meters are non-discretionary and mandated for replacement at predictable intervals. In the last decade, digitization and data collection have driven innovation in the space, leading to incremental sales. But like the broader industrials sector, measurement and inspection instrument companies are at the whim of economic cycles. Interest rates, for example, can greatly impact civil, commercial, and residential construction projects that drive demand.
The 6 inspection instruments stocks we track reported a strong Q3. As a group, revenues beat analysts’ consensus estimates by 2% while next quarter’s revenue guidance was 11.2% above.
Thankfully, share prices of the companies have been resilient as they are up 8.2% on average since the latest earnings results.
Best Q3: FARO (NASDAQ:FARO)
Launched by two PhD students in a garage, FARO (NASDAQ:FARO) provides 3D measurement and imaging systems for the manufacturing, construction, engineering, and public safety industries.
FARO reported revenues of $82.56 million, down 4.9% year on year. This print exceeded analysts’ expectations by 4.5%. Overall, it was an exceptional quarter for the company with EPS guidance for next quarter exceeding analysts’ expectations and a solid beat of analysts’ EPS estimates.
"I am proud of our ongoing progress in profitability, achieving 55.7% gross margins, GAAP net loss of $0.3 million and $8.9 million of adjusted EBITDA, or 10.7% of revenue, all exceeding our expectations for the third quarter. This marks a significant transformation in our operations over the past year, as its the first time that we have delivered back-to-back double-digit quarterly adjusted EBITDA margins in almost a decade," said Peter Lau, President & Chief Executive Officer.
FARO Total Revenue
FARO scored the biggest analyst estimates beat but had the slowest revenue growth of the whole group. Unsurprisingly, the stock is up 32.7% since reporting and currently trades at $24.97.
Founded by a small group of engineers who wanted to build a more efficient way to read utility meters, Itron (NASDAQ:ITRI) offers energy and water management products for the utility industry, municipalities, and industrial customers.
Itron reported revenues of $615.5 million, up 9.8% year on year, outperforming analysts’ expectations by 3.2%. The business had an exceptional quarter with an impressive beat of analysts’ EPS estimates and a solid beat of analysts’ EBITDA estimates.
Itron Total Revenue
However, the results were likely priced into the stock as it’s traded sideways since reporting. Shares currently sit at $103.37.
With its monitoring devices installed on spacecraft, Mirion (NYSE:MIR) offers radiation technology to government agencies, healthcare providers, and industrial companies.
Mirion reported revenues of $206.8 million, up 8.2% year on year, exceeding analysts’ expectations by 1.5%. Still, it was a softer quarter as it posted a significant miss of analysts’ EBITDA and EPS estimates.
Interestingly, the stock is up 13% since the results and currently trades at $15.87.
The developer of the world’s first frost-proof water meter in 1905, Badger Meter (NYSE:BMI) provides water control and measure equipment to various industries.
Badger Meter reported revenues of $208.4 million, up 11.9% year on year. This print missed analysts’ expectations by 1.8%. More broadly, it was a mixed quarter as it also recorded an impressive beat of analysts’ adjusted operating income estimates but a miss of analysts’ EPS estimates.
Badger Meter scored the fastest revenue growth but had the weakest performance against analyst estimates among its peers. The stock is down 5.9% since reporting and currently trades at $206.71.
Spun off from Hewlett-Packard in 2014, Keysight (NYSE:KEYS) offers electronic measurement products for use in various sectors.
Keysight reported revenues of $1.29 billion, down 1.8% year on year. This print surpassed analysts’ expectations by 2.3%. It was a very strong quarter as it also produced EPS guidance for next quarter exceeding analysts’ expectations.
The stock is up 5.8% since reporting and currently trades at $161.06.
Thanks to the Fed's series of rate hikes in 2022 and 2023, inflation has cooled significantly from its post-pandemic highs, drawing closer to the 2% goal. This disinflation has occurred without severely impacting economic growth, suggesting the success of a soft landing. The stock market has thrived in 2024, spurred by recent rate cuts (0.5% in September and 0.25% each in November and December), and a notable surge followed Donald Trump's presidential election win in November, propelling indices to historic highs. Nonetheless, the outlook for 2025 remains clouded by the pace and magnitude of future rate cuts as well as potential changes in trade policy and corporate taxes once the Trump administration takes over. The path forward is marked by uncertainty.
Want to invest in winners with rock-solid fundamentals? Check out our Top 5 Quality Compounder Stocks and add them to your watchlist. These companies are poised for growth regardless of the political or macroeconomic climate.
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