Home Most Popular Investing Reasons Why You Should Avoid Betting on IDEX (IEX) Stock Now

Reasons Why You Should Avoid Betting on IDEX (IEX) Stock Now

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Reasons Why You Should Avoid Betting on IDEX (IEX) Stock Now

IDEX Corporation (IEX) has been disappointing investors with its recent performance, mainly due to weaknesses in its Health & Science Technologies (HST) segment, increasing operating costs, and unfavorable foreign currency movements. These factors are expected to negatively impact the company’s earnings in the coming quarters. Let’s explore the reasons why you might want to avoid betting on IEX stock.

Business Weakness in HST Segment

The weakness in IDEX’s HST segment, particularly in the analytical instrumentation, life sciences, biopharma, and semiconductor end markets, is a cause for concern. The segment’s adjusted EBITDA margin plummeted by 420 basis points in the second quarter of 2023 due to unfavorable volume leverage and mix, as well as rising employee-related costs. Despite previous expectations of a modest rebound in the HST segment, IDEX no longer foresees a recovery due to supply chain normalization and slower growth in China. As a result, the company has revised its organic revenue guidance for 2023, anticipating a decline of 1-2% instead of the previously predicted 0-3% growth.

Increasing Costs and Expenses

IDEX has been grappling with higher costs of sales, primarily driven by increasing raw material costs. Additionally, selling, general, and administrative expenses have risen due to higher employee-related costs and discretionary spending.

Forex Woes

As a global company, IDEX is exposed to the volatility of foreign currency movements. In the second quarter of 2023, unfavorable forex movements caused a 1% decline in sales for the Fluid & Metering Technologies segment. Overall, foreign currency fluctuations negatively impacted the company’s total sales by 1%.

Negative Estimate Revisions

In the past 60 days, analysts have revised their earnings estimates for IEX downwards by 6.2% for 2023. These negative revisions do not bode well for the stock’s performance.

Underperformance

Despite the market’s growth, IEX stock has only increased by 3.3% over the past year, significantly underperforming the industry’s 19.1% growth.

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Consider These Stocks Instead

If you’re looking for better investment opportunities in the Industrial Products sector, consider the following companies:

Caterpillar Inc. (CAT) is currently ranked as a Zacks Rank #1 (Strong Buy) stock. Caterpillar has shown consistent earnings growth, with a 17.8% surprise in the last four quarters. Estimates for their 2023 earnings have also increased, and the stock has gained 62.7% in the past year.

Ingersoll Rand Inc. (IR) is another top-performing stock with a Zacks Rank #1. Ingersoll Rand has delivered an average earnings surprise of 14.9% in the last four quarters. Estimates for their 2023 earnings have increased, and the stock has gained 43.5% in the past year.

Eaton Corporation plc (ETN), ranked as a Zacks Rank #2 (Buy), has consistently exceeded earnings expectations, with a trailing four-quarter surprise of approximately 3%. Estimates for their 2023 earnings have increased, and the stock has soared 56.9% in the past year.

You can find more information and recommendations from Zacks Investment Research by downloading their report on the 7 Best Stocks for the Next 30 Days.

Click here to access Caterpillar Inc.’s free stock analysis report.

Click here to access Ingersoll Rand Inc.’s free stock analysis report.

Click here to access Eaton Corporation, PLC’s free stock analysis report.

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