Colfax Corporation CFX may interest investors that seek to gain exposure in the manufacturing industry. Its strong fundamentals and healthy growth opportunities are its compelling points. Also, upwardly revised earnings estimates reflect prevailing bullish sentiments. The company currently carries Zacks Rank #2 (Buy).
It is based in Fulton, MD, and has a market capitalization of $3.8 billion. The company belongs to the Zacks Manufacturing – General Industrial industry, which is part of the broader Zacks Industrial Products sector.
In the past six months, the company’s shares gained 40.6% compared with the industry’s growth of 31.1%. During the same period, the S&P 500 grew 23.9% and the sector expanded 35%.
Below we have discussed why it is prudent to invest in Colfax now.
Segmental Gains: Colfax has two reporting segments, including Fabrication Technology and Medical Technology. Healthy prospects for these segments are likely to support the company’s top-line performance.
In the long run, the Medical Technology segment is likely to gain from active lifestyles, population increase, sports, easy accessibility to healthcare and aging. Also, the focus on product development might be beneficial. A few products launched in the past few months include EMPOWR Partial Knee, Motion iQ, Donjoy X-ROM Post-Op Knee Brace, AltiVate Anatomic CS Edge and DonJoy VersaRom Hip Brace.
Further, the Fabrication Technology segment stands to benefit from the exposure in emerging markets, infrastructural investments and improving industrial production in the long run. Also, product launches might be beneficial. A few notable products introduced in the past few months are OK GoldRox Stick Electrodes, GCE ProControl, Aristo 500ix & Robust Feed U6, ROGUE ES 180i, and WeldCloud Notes document management software.
The Zacks Consensus Estimate for revenues of the Fabrication Technology segment is pegged at $451 million, reflecting growth of 8.9% from $414 million reported in the previous quarter. On the other hand, the consensus estimate for the Medical Technology segment is pinned at $298 million, up 42.6% from $209 million reported in the previous quarter.
Diversified Business Structure: The company has exposure in multiple end-markets — including petrochemical, general industrial, power generation, mining, marine, and others. Also, its geographical presence is impressive, having operations in the Middle East, the United States, Europe, Asia, and South America. Such diversifications in business structure help the company to offset weakness in one or more markets with benefits from the others.
The Zacks Consensus Estimate for Colfax’s third-quarter revenues is at $756 million, reflecting an increase of 21.6% from $620 million recorded in the previous quarter.
Other Tailwinds: In the pandemic period, the company is committed to providing services to customers, ensuring the safety of its workers and keeping healthy liquidity. Also, cost-reduction measures are being taken to tackle the financial pressure.
Colfax anticipates that its profits will be higher sequentially in the third quarter of 2020. Earnings before interest, tax and amortization margin are expected to be in low 30% in the quarter.
Earnings Estimate Trend: Colfax’s earnings estimates have been revised upward in the past 60 days. Currently, the Zacks Consensus Estimate for its earnings is pegged at $1.36 for 2020, reflecting growth of 4.6% from the 60-day-ago figure. The same for 2021 has increased 2.6% to $1.98 during the same period.
Colfax Corporation Price and Consensus
Colfax Corporation price-consensus-chart | Colfax Corporation Quote
It is worth noting here that four upward revisions have been recorded for both 2020 and 2021 in the past 60 days. There was no downward revision for 2020 and 2021 in the past 60 days.
Also, the consensus estimate for the third quarter of 2020 is pegged at 39 cents, reflecting growth from 36 cents per share in the past 60 days. The revision came on the back of three upward revisions versus none downward.
Other Key Picks
Some other better-ranked stocks in the industry are Kaman Corporation KAMN, Flowserve Corporation FLS and Dover Corporation DOV. While Kaman currently sports a Zacks Rank #1 (Strong Buy), both Flowserve and Dover carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
In the past 60 days, earnings estimates for these stocks have improved for the current year. Further, earnings surprise for the last reported quarter was 71.43% for Kaman, 82.76% for Flowserve and 26.97% for Dover.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.