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Industrial conglomerate SPX Technologies (NYSE:SPXC) reported Q2 CY2024 results exceeding Wall Street analysts' expectations, with revenue up 18.4% year on year to $501.3 million. The company expects the full year's revenue to be around $2.00 billion, in line with analysts' estimates. It made a non-GAAP profit of $1.42 per share, improving from its profit of $1.06 per share in the same quarter last year.
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SPX Technologies (SPXC) Q2 CY2024 Highlights:
- Revenue: $501.3 million vs analyst estimates of $490.7 million (2.2% beat)
- EPS (non-GAAP): $1.42 vs analyst estimates of $1.25 (13.3% beat)
- The company reconfirmed its revenue guidance for the full year of $2.00 billion at the midpoint
- Gross Margin (GAAP): 40.1%, up from 38.9% in the same quarter last year
- Free Cash Flow of $47.1 million, up from $333,333 in the previous quarter
- Market Capitalization: $6.82 billion
Gas and Liquid HandlingGas and liquid handling companies possess the technical know-how and specialized equipment to handle valuable (and sometimes dangerous) substances. Lately, water conservation and carbon capture–which requires hydrogen and other gasses as well as specialized infrastructure–have been trending up, creating new demand for products such as filters, pumps, and valves. On the other hand, gas and liquid handling companies are at the whim of economic cycles. Consumer spending and interest rates, for example, can greatly impact the industrial production that drives demand for these companies’ offerings.
Sales GrowthExamining a company's long-term performance can provide clues about its business quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Over the last five years, SPX Technologies grew its sales at a weak 4.3% compounded annual growth rate. This shows it failed to expand in any major way and is a rough starting point for our analysis.
Long-term growth is the most important, but within industrials, a half-decade historical view may miss new industry trends or demand cycles. SPX Technologies's annualized revenue growth of 20.6% over the last two years is above its five-year trend, suggesting its demand recently accelerated.
This quarter, SPX Technologies reported robust year-on-year revenue growth of 18.4%, and its $501.3 million of revenue exceeded Wall Street's estimates by 2.2%. Looking ahead, Wall Street expects sales to grow 8.9% over the next 12 months, a deceleration from this quarter.
Operating MarginSPX Technologies has done a decent job managing its expenses over the last five years. The company has produced an average operating margin of 8.9%, higher than the broader industrials sector.
Analyzing the trend in its profitability, SPX Technologies's annual operating margin rose by 4.8 percentage points over the last five years, showing its efficiency has improved.
This quarter, SPX Technologies generated an operating profit margin of 14.9%, up 2.8 percentage points year on year. This increase was encouraging, and since the company's operating margin rose more than its gross margin, we can infer it was recently more efficient with expenses such as sales, marketing, R&D, and administrative overhead.
EPSAnalyzing long-term revenue trends tells us about a company's historical growth, but the long-term change in its earnings per share (EPS) points to the profitability of that growth–for example, a company could inflate its sales through excessive spending on advertising and promotions.
SPX Technologies's EPS grew at a spectacular 14.9% compounded annual growth rate over the last five years, higher than its 4.3% annualized revenue growth. This tells us the company became more profitable as it expanded.
We can take a deeper look into SPX Technologies's earnings quality to better understand the drivers of its performance. As we mentioned earlier, SPX Technologies's operating margin expanded by 4.8 percentage points over the last five years. This was the most relevant factor (aside from the revenue impact) behind its higher earnings; taxes and interest expenses can also affect EPS but don't tell us as much about a company's fundamentals.
Like with revenue, we also analyze EPS over a more recent period because it can give insight into an emerging theme or development for the business. For SPX Technologies, its two-year annual EPS growth of 43.4% was higher than its five-year trend. We love it when earnings growth accelerates, especially when it accelerates off an already high base.
In Q2, SPX Technologies reported EPS at $1.42, up from $1.06 in the same quarter last year. This print easily cleared analysts' estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects SPX Technologies to grow its earnings. Analysts are projecting its EPS of $4.98 in the last year to climb by 13.2% to $5.64.
Key Takeaways from SPX Technologies's Q2 ResultsWe enjoyed seeing SPX Technologies exceed analysts' revenue expectations this quarter. We were also excited its EPS outperformed Wall Street's estimates. Overall, we think this was a strong quarter that should satisfy shareholders. Investors were likely expecting more, however, and the stock traded down 1.5% to $141 immediately after reporting.
