Ametek misses Q2 rev. estimates, issues weak Q3 EPS view
Last week, Ametek, Inc (NYSE: AME), the manufacturer of electronic instruments and electromechanical devices reported a decline in the fiscal 2016 second-revenue, compared to the corresponding period last year. The revenue also missed the analysts estimate. The earnings were in line with the Zacks consensus estimate. Due to the poor third-quarter and fiscal 2016 earnings guidance given by the company, we believe that the share price would continue to spiral downwards in the weeks ahead. The stock closed at $47.08 on Monday.
The Berwyn, Pennsylvania-based company reported a decline in the fiscal 2016 second-quarter net sales to $977.71 million, from $1 billion in the second-quarter of 2015. Ametek’s reported revenue came below the analysts’ estimate of $999 million. Ametek operates under two segments, namely Electronic Instruments Group (EIG) and Electromechanical Group (EMG). The EIG reported revenue of $596 million, down 0.1% on a y-o- y basis. The EMG reported 6.3% y-o- y decline in the revenue to $381.7 million.
The EIG and EMG group contributed 61% and 39% respectively to the total revenue of the company. For the Q2 2016, the net income plunged to $138.19 million or $0.59 per share, from $155.51 million or $0.64 per share in the Q2 2015. The earnings per share met the analysts’ estimates of $0.59 per share.
AMETEK, Inc.
Ametek expects third-quarter sales to decline by mid-single digit percentage, compared to the third-quarter of 2015. The company also anticipates Q3 earnings to be between $0.54 and $0.55 per share. The Street’s estimate currently stands at $0.55 per share. For the fiscal 2016, Ametek anticipates net sales to decline by a low single digit percentage, from the fiscal 2015 net sales of $3.97 billion.
The company also forecasts organic sales to fall by as much as 5%, when compared to full year 2015. The end to end technology solutions provider also trimmed down its fiscal 2016 earnings expectation to a range of $2.28 to $2.32 per share, from the prior guidance of between $2.42 and $2.52 per share. The estimate of analysts currently stands at $2.44 per share for the fiscal 2016. So, considering the poor Q3 and FY16 guidance, we believe that any uptrend in the stock price should be used only as an opportunity to exit or go short.
The stock faces major resistance at 54 levels. The immediate support for the stock exists at 42. The stochastic indicator continues to oscillate below the reading of 50 thereby indicating bearishness in the scrip.
Thus, speculating on a downtrend in the stock by purchasing a one touch put option is the best option available as of now. A target price of not lower than $42 and an expiry date in the second week of September will also increase the probability of concluding the trade with a profit.
