Stock Story -
Industrial manufacturer Standex (NYSE:SXI) missed analysts' expectations in Q2 CY2024, with revenue down 4.3% year on year to $180.2 million. It made a GAAP profit of $1.65 per share, down from its profit of $1.69 per share in the same quarter last year.
Is now the time to buy Standex? Find out by reading the original article on StockStory, it's free.
Standex (SXI) Q2 CY2024 Highlights:
- Revenue: $180.2 million vs analyst estimates of $181.3 million (small miss)
- EPS: $1.65 vs analyst estimates of $1.59 (3.9% beat)
- Gross Margin (GAAP): 38.5%, down from 39.1% in the same quarter last year
- Free Cash Flow of $22.2 million, up 15.7% from the previous quarter
- Market Capitalization: $2.21 billion
Holding over 500 patents globally, Standex (NYSE:SXI) is a manufacturer and distributor of industrial components for various sectors.
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 GrowthA company’s long-term performance can give signals about its business quality. Even a bad business can shine for one or two quarters, but a top-tier one tends to grow for years. Over the last five years, Standex grew its sales at a weak 3.7% 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. Standex's history shows it grew in the past but relinquished its gains over the last two years, as its revenue fell by 1% annually.
This quarter, Standex missed Wall Street's estimates and reported a rather uninspiring 4.3% year-on-year revenue decline, generating $180.2 million of revenue. Looking ahead, Wall Street expects sales to grow 5.7% over the next 12 months, an acceleration from this quarter.
Operating MarginStandex has been an optimally-run company over the last five years. It was one of the more profitable businesses in the industrials sector, boasting an average operating margin of 13.6%. This result isn't surprising as its high gross margin gives it a favorable starting point.
Analyzing the trend in its profitability, Standex's annual operating margin rose by 4.3 percentage points over the last five years, showing its efficiency has improved.
This quarter, Standex generated an operating profit margin of 15.1%, in line with the same quarter last year. This indicates the company's cost structure has recently been stable.
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.
Standex's EPS grew at a weak 2% compounded annual growth rate over the last five years, lower than its 3.7% annualized revenue growth. However, its operating margin actually expanded during this timeframe, telling us non-fundamental factors affected its ultimate earnings.
Like with revenue, we also analyze EPS over a shorter period to see if we are missing a change in the business. Standex's two-year annual EPS growth of 10.2% was good and topped its two-year revenue performance.
In Q2, Standex reported EPS at $1.65, down from $1.69 in the same quarter last year. Despite falling year on year, this print beat analysts' estimates by 3.9%. Over the next 12 months, Wall Street expects Standex to grow its earnings. Analysts are projecting its EPS of $6.15 in the last year to climb by 25.3% to $7.71.
Key Takeaways from Standex's Q2 ResultsIt was good to see Standex beat analysts' EPS expectations this quarter. On the other hand, its revenue unfortunately missed. Overall, this was a mediocre quarter for Standex. The stock remained flat at $180.51 immediately after reporting.
