01—Abstract
Summary
Summary of the 8-K filed May 2, 2024. Cited figures are marked; the original filing is the authoritative source.
AMETEK (NYSE: AME) reported record first-quarter 2024 results on May 2, 2024, with sales of $1.74 billiona, up 9% year over year, and GAAP diluted EPS of $1.34.
Adjusted diluted EPS was $1.64b, up 10% from $1.49 in the prior-year quarter, after excluding a $29.2 million pre-tax ($0.10 per share) Paragon Medical integration charge and adding back $0.21 per share of after-tax acquisition-related intangible amortization. Adjusted operating income reached a record $446.4 million, with adjusted operating margin of 25.7%, up 30 basis points. Operating cash flow was $410 million and free cash flow conversion was 123%, with free cash flow of $382.6 million.
The quarter was driven by the Electronic Instruments Group (EIG), where sales rose 4% to $1.16 billionc and operating margin hit a record 30.5%, up 280 basis points. The Electromechanical Group (EMG) grew sales 21% to a record $579.4 million, largely due to acquisitions, but its GAAP operating margin fell to 15.7% from 25.1%. Management attributed the EMG weakness to customer inventory normalization and the dilutive effect of recent acquisitions, and expects a second-half recovery.
Notably, GAAP operating margin for EMG excluding Paragon integration costs and acquisition dilution is 24.1%, compared with 25.1% a year earlier. For 2024, AMETEK maintained its outlook for low-double-digit percentage sales growth and raised its adjusted diluted EPS guidance to $6.74 to $6.86d, up 6% to 8%, from the prior range of $6.70 to $6.85.
For the second quarter, management guided to mid-to-high single-digit sales growth and adjusted EPS of $1.63 to $1.65. Investors should weigh the strong EIG margin expansion and cash generation against the EMG margin compression and the elevated interest expense, which rose to $35.3 million from $20.6 million year over year.
02—Key points
Key Highlights
- Record Q1 2024 sales of $1.74 billion, up 9% year over year, and record adjusted operating income of $446.4 million, up 10%.
- Adjusted diluted EPS of $1.64, up 10% from $1.49, while GAAP diluted EPS was $1.34 after a $0.13 per share Paragon Medical integration charge.
- EIG delivered a record 30.5% operating margin, up 280 basis points, on 4% sales growth and 14% operating income growth.
- EMG sales rose 21% to a record $579.4 million, but GAAP operating margin fell to 15.7% from 25.1%, reflecting integration costs, acquisition dilution and customer inventory normalization.
- Strong cash generation: operating cash flow of $410 million, free cash flow of $382.6 million, and 123% free cash flow conversion.
- 2024 adjusted EPS guidance raised to $6.74–$6.86 from $6.70–$6.85; full-year sales growth still expected in the low double digits.
- Q2 2024 guidance calls for mid-to-high single-digit sales growth and adjusted EPS of $1.63–$1.65, up 4% to 5%.
03—Questions
Frequently Asked Questions
Why did AMETEK's GAAP EPS differ from its adjusted EPS in the first quarter?
GAAP diluted EPS was $1.34 versus adjusted EPS of $1.64. The gap reflects a $0.13 per share pre-tax Paragon Medical integration charge (net of a $0.03 tax benefit) and $0.21 per share of after-tax amortization of acquisition-related intangibles, along with a $0.01 rounding item. Management views the adjusted figure as a better measure of ongoing operating performance.
What drove the decline in Electromechanical Group profitability?
EMG's GAAP operating margin fell to 15.7% from 25.1%. Roughly 5 percentage points came from Paragon integration costs and about 3.4 points from dilution from recent acquisitions. Management also cited customer inventory normalization weighing on sales. Excluding these items, the core EMG margin was 24.1%, slightly below last year's 25.1%.
Is AMETEK's guidance for 2024 changing?
The company raised its full-year adjusted EPS guidance modestly to $6.74–$6.86 from $6.70–$6.85, a 6% to 8% increase over 2023. Sales growth guidance was unchanged at low double digits in percentage terms. Management expects EMG to improve in the second half of 2024.
How strong was AMETEK's cash flow in the quarter?
Operating cash flow was $410.2 million, up from $386.5 million, and capital expenditures were $27.7 million. This produced free cash flow of $382.6 million and a free cash flow conversion rate of 123%, compared with 120% a year earlier.
Did AMETEK's balance sheet or debt position change materially?
Total debt fell, with short-term borrowings and current portion of long-term debt dropping to $1.06 billion from $1.42 billion and long-term debt declining to $1.88 billion from $1.90 billion. Cash decreased to $373.8 million from $409.8 million, and stockholders' equity rose to $8.97 billion from $8.73 billion. Interest expense, however, increased to $35.3 million from $20.6 million year over year.
04—Continue