Electronic products manufacturer AMETEK (NYSE:AME) missed Wall Street’s revenue expectations in Q4 CY2024 as sales only rose 1.8% year on year to $1.76 billion. Its non-GAAP profit of $1.87 per share was 1.1% above analysts’ consensus estimates.

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"AMETEK delivered strong results in the fourth quarter, with outstanding operating performance driving robust core margin expansion, record earnings and strong cash flow growth," stated David A. Zapico, AMETEK Chairman and Chief Executive Officer.

Company Overview

Started from its humble beginnings in motor repair, AMETEK (NYSE:AME) manufactures electronic devices used in industries like aerospace, power, and healthcare.

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Sales Growth

Examining a company’s long-term performance can provide clues about its 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, AMETEK grew its sales at a mediocre 6.1% compounded annual growth rate. This was below our standard for the industrials sector 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. AMETEK’s annualized revenue growth of 6.2% over the last two years aligns with its five-year trend, suggesting its demand was consistently weak.

This quarter, AMETEK’s revenue grew by 1.8% year on year to $1.76 billion, falling short of Wall Street’s estimates.

Looking ahead, sell-side analysts expect revenue to grow 5.8% over the next 12 months, similar to its two-year rate. This projection doesn't excite us and indicates its newer products and services will not accelerate its top-line performance yet.

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Adjusted Operating Margin

Operating margin is an important measure of profitability as it shows the portion of revenue left after accounting for all core expenses – everything from the cost of goods sold to advertising and wages. It’s also useful for comparing profitability across companies with different levels of debt and tax rates because it excludes interest and taxes.

AMETEK has been a well-oiled machine over the last five years. It demonstrated elite profitability for an industrials business, boasting an average operating margin of 24.6%. This result isn’t too surprising as its gross margin gives it a favorable starting point.

Looking at the trend in its profitability, AMETEK’s operating margin rose by 3 percentage points over the last five years, showing its efficiency has improved.

In Q4, AMETEK generated an operating profit margin of 26.6%, in line with the same quarter last year. This indicates the company’s cost structure has recently been stable.

Earnings Per Share

Revenue trends explain a company’s historical growth, but the long-term change in 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.

AMETEK’s EPS grew at a solid 10.3% compounded annual growth rate over the last five years, higher than its 6.1% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

We can take a deeper look into AMETEK’s earnings to better understand the drivers of its performance. As we mentioned earlier, AMETEK’s operating margin was flat this quarter but expanded by 3 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 analyze EPS over a shorter period to see if we are missing a change in the business.

For AMETEK, its two-year annual EPS growth of 9.7% is similar to its five-year trend, implying stable earnings power.

In Q4, AMETEK reported EPS at $1.87, up from $1.68 in the same quarter last year. This print beat analysts’ estimates by 1.1%. Over the next 12 months, Wall Street expects AMETEK’s full-year EPS of $6.83 to grow 6.4%.

Key Takeaways from AMETEK’s Q4 Results

We struggled to find many resounding positives in these results. Its revenue missed significantly and its full-year EPS guidance fell short of Wall Street’s estimates. Overall, this quarter could have been better. The stock traded down 3.1% to $178.44 immediately after reporting.

AMETEK’s earnings report left more to be desired. Let’s look forward to see if this quarter has created an opportunity to buy the stock. What happened in the latest quarter matters, but not as much as longer-term business quality and valuation, when deciding whether to invest in this stock. We cover that in our actionable full research report which you can read here, it’s free.