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    AMETEK Inc (AME)

    Business Description

    AMETEK, Inc. is a leading global manufacturer specializing in electronic instruments and electromechanical devices, operating through two main segments: the Electronic Instruments Group (EIG) and the Electromechanical Group (EMG) . The company provides advanced analytical, test, and measurement instruments for various markets, including process, aerospace, medical, power, and industrial sectors . AMETEK's offerings include highly engineered medical components, automation solutions, thermal management systems, and specialty metals .

    1. Electronic Instruments Group (EIG) - Develops advanced analytical, test, and measurement instruments for process, aerospace, medical, power, and industrial markets.

      • Process and Analytical Instrumentation - Offers instruments for process and analytical applications across various industries.
      • Aerospace and Power Instrumentation - Provides specialized instruments for aerospace and power sectors.

    2. Electromechanical Group (EMG) - Focuses on highly engineered medical components, automation solutions, thermal management systems, and specialty metals.

      • Automation and Engineered Solutions - Delivers automation solutions and engineered products for diverse applications.
      • Aerospace Products - Supplies aerospace products tailored to meet specific industry needs.

    Q3 2024 Summary

    Initial Price$168.06July 1, 2024
    Final Price$169.10October 1, 2024
    Price Change$1.04
    % Change+0.62%

    What went well

    • Aerospace & Defense segment, which represents about 18% of AMETEK, delivered strong performance with both overall and organic sales up mid-single digits, and is expected to achieve high single-digit organic growth for the full year.
    • Electromechanical Group (EMG) orders were up 12% organically with a positive book-to-bill of 1.02, indicating improving demand trends despite ongoing destocking.
    • Semiconductor businesses are expected to be up mid-single digits for the year (about 6% of the portfolio), driven by unique products and recent acquisitions enhancing capabilities in advanced semiconductor technologies.

    What went wrong

    • AMETEK's Automation & Engineered Solutions segment experienced a high single-digit decline in organic sales due to continued inventory destocking by OEM customers, and the company expects organic sales in this segment to decline mid-single digits for the full year as destocking headwinds continue.
    • Customer project delays in the Electronic Instruments Group's Test and Measurement businesses are affecting sales growth, driven by economic, geopolitical, and election uncertainties causing customers to remain cautious.
    • Key segments, including Process businesses and Power & Industrial businesses, reported declines in organic sales in the quarter, with Process businesses declining low single digits and Power & Industrial businesses' organic sales down low single digits, indicating potential weakness in these markets.

    Q&A Summary

    1. Destocking Impact
      Q: Is destocking affecting demand, and will it continue?
      A: We saw demand in line with expectations as OEM customers and our automation and Paragon businesses worked down excess inventory, and destocking headwinds will continue. However, order trends are heading in the right direction, with EMG orders up 12% organically and a positive book-to-bill of 1.02. We're confident it's a destocking issue, not reduced demand, and we're working through it.

    2. Paragon Medical Outlook
      Q: What's the status and outlook for Paragon Medical?
      A: Paragon met expectations for Q3, with sequential order improvements similar to our other businesses. It's well-positioned in attractive med tech markets, with many new program wins that will provide upside as they phase in. As destocking abates, we expect improvement in 2025, supported by efficiency improvements and new products.

    3. Order Growth Trends
      Q: How are orders trending across the business?
      A: We've seen healthy sequential increases in orders, with the company's book-to-bill at 1.02, and orders turning positive. EMG orders were up 12% organically, and EIG orders improved from -11% in Q1 to -2% in Q3. We're encouraged by these positive trends across all divisions.

    4. Aerospace Exposure
      Q: How are customer issues impacting Aerospace outlook?
      A: Despite minor delays, we've factored the impacts into our Q4 guidance. Our Aerospace business has diverse exposures across a wide range of platforms, with a healthy mix of OEM and aftermarket sales, and no overexposure to any single customer or platform. We're confident in our position and see strong demand ahead.

    5. Acquisition Pipeline
      Q: What's the status of the acquisition pipeline?
      A: Our pipeline remains robust, and we feel things are starting to move at an accelerated pace. We're actively looking at a high number of quality deals across a variety of sizes, and with our strong balance sheet, we're well-positioned to execute as opportunities arise.

    6. Margin Recovery
      Q: Can you discuss the margin recovery plan and tailwinds?
      A: We're improving the business significantly, including plant closures and funding new product phases. While we don't provide guidance for 2025 at this time, the actions we're taking now are expected to create a very positive scenario as we move forward.

    7. China Sales
      Q: How did China revenue perform this quarter?
      A: Our China business was up 10%, with strong growth in our Ultra Precision Technology division. While the market remains choppy and difficult to predict, we're well-positioned with products that help customers improve manufacturing processes and efficiency.

    8. Defense Business
      Q: What's the status of the defense business and delays?
      A: We experienced some project timing impacts in Q2 and Q3, but we expect this to reverse with good things scheduled for Q4. The defense business is growing, although project-based and can be lumpy, but it's headed in the right direction.

    9. Semi Cap Cycle
      Q: Can you outgrow the semiconductor equipment market?
      A: We believe we can. Our semiconductor businesses were up mid-single digits in the quarter, driven by unique products. Our portfolio balances laboratory and production equipment, mitigating swings, and we're seeing positive market dynamics with new technologies.

    10. Pricing Trends
      Q: How is pricing and price/cost spread evolving?
      A: We're returning to normal patterns, achieving 3% price increases in the quarter, consistent across the portfolio, resulting in about 100 basis points of positive spread. We expect to maintain a positive price/cost spread of about 50 basis points going forward, with typical price increases of 2–3%.

    11. R&D Investment
      Q: Can Vitality Index go higher, and any standout units?
      A: We believe the right level for our Vitality Index is between 20% and 30%; we're currently at 28%, and it could vary within that range. Our investment is distributed across the company, with incremental $90 million spent on projects that will drive future sales. We consistently fund R&D, which pays off in the long run.

    12. Project Delays
      Q: When will project delays resolve, any catch-up expected?
      A: Our Q4 guidance assumes a normal, strong quarter for our project businesses and EIG, with a sequential increase from Q3 due to seasonality and project activity. We feel there's year-end spending occurring, which is positive.

    13. Restructuring at Paragon
      Q: How is restructuring at Paragon progressing given regulations?
      A: We're experienced with regulated environments, adjusting our timing accordingly, moving carefully and deliberately. While it takes longer, we're committed to doing it right, leveraging our experience from other regulated markets like aerospace and defense.

    14. Inventory Impact on Paragon
      Q: Will Paragon bounce back post-inventory drawdown?
      A: As the inventory situation abates, we expect improvement in 2025. With a lower cost structure and new products phasing in, we anticipate a positive trajectory, although it will take some time as recovery isn't instantaneous.

    Key Metrics

    View all financials →
    Revenue by Segment - in Millions of USDFY 2013Q1 2014Q2 2014Q3 2014Q4 2014FY 2014Q1 2015Q2 2015Q3 2015Q4 2015FY 2015Q1 2016Q2 2016Q3 2016Q4 2016FY 2016Q1 2017Q2 2017Q3 2017Q4 2017FY 2017Q1 2018Q2 2018Q3 2018Q4 2018FY 2018Q1 2019Q2 2019Q3 2019Q4 2019FY 2019Q1 2020Q2 2020Q3 2020Q4 2020FY 2020Q1 2021Q2 2021Q3 2021Q4 2021FY 2021Q1 2022Q2 2022Q3 2022Q4 2022FY 2022Q1 2023Q2 2023Q3 2023Q4 2023FY 2023Q1 2024Q2 2024Q3 2024
    Electronic Instruments Group (EIG)1,117.21,134.61,136.11,236.44,624.31,156.81,153.61,134.6
    Electromechanical Group (EMG)479.9511.5486.7494.61,972.7579.4581.2574.0
    Process and Analytical Instrumentation794.4798.7801.0873.63,267.7791.5802.7779.8
    Aerospace and Power465.9485.8481.9511.41,945.0517.7505.4515.0
    - EIG------350.9354.8
    - EMG------426.8413.8
    Automation and Engineered Solutions336.8361.7339.9345.91,384.3426.9426.8413.8
    Electromechanical Devices--------
    Total Revenue1,597.11,646.11,622.81,730.956,596.951,736.21,734.81,708.6
    Revenue by Geography - in Millions of USDFY 2013Q1 2014Q2 2014Q3 2014Q4 2014FY 2014Q1 2015Q2 2015Q3 2015Q4 2015FY 2015Q1 2016Q2 2016Q3 2016Q4 2016FY 2016Q1 2017Q2 2017Q3 2017Q4 2017FY 2017Q1 2018Q2 2018Q3 2018Q4 2018FY 2018Q1 2019Q2 2019Q3 2019Q4 2019FY 2019Q1 2020Q2 2020Q3 2020Q4 2020FY 2020Q1 2021Q2 2021Q3 2021Q4 2021FY 2021Q1 2022Q2 2022Q3 2022Q4 2022FY 2022Q1 2023Q2 2023Q3 2023Q4 2023FY 2023Q1 2024Q2 2024Q3 2024
    United States809.015859.892891.134908.763,468.8912.757944.878894.848
    International788.102786.219731.703822.183,128.2823.423789.956813.716
    - United Kingdom59.10051.55253.67550.17214.554.89963.51456.407
    - European Union252.465241.687214.957235.89945.0257.228235.418232.342
    - Asia334.797343.389319.621380.291,378.1348.244338.300361.866
    - Other Foreign Countries141.740149.591143.450155.82590.6163.052152.724163.101
    Total Revenue1,597.1171,646.1111,622.8371,730.936,597.01,736.1801,734.8341,708.564

    Executive Team

    NamePositionStart DateShort Bio
    David A. ZapicoChairman and Chief Executive Officer2017David A. Zapico has been serving as the Chairman and CEO since 2017. He has 34 years of experience in the industry and with AMETEK .
    William J. BurkeExecutive Vice President–Chief Financial OfficerMay 15, 2016William J. Burke has served as the CFO since May 15, 2016 and has over 36 years of service with AMETEK. He will retire on April 2, 2024 .
    Ronald J. OscherChief Administrative OfficerMay 5, 2016Ronald J. Oscher was elected as the Chief Administrative Officer effective May 5, 2016 and has 13 years of service with AMETEK .
    Emanuela SperanzaChief Commercial OfficerJanuary 1, 2022Emanuela Speranza serves as the Chief Commercial Officer since January 1, 2022. She has 10 years of service with AMETEK .
    Tony J. CiampittiPresident–Electronic InstrumentsJanuary 1, 2017Tony J. Ciampitti was elected President–Electronic Instruments effective January 1, 2017 and has 27 years of service with AMETEK .
    John W. HardinPresident–Electronic InstrumentsJuly 23, 2008John W. Hardin was elected President–Electronic Instruments effective July 23, 2008 and has 25 years of service with AMETEK .
    David F. HermancePresident–Electromechanical GroupJanuary 1, 2022David F. Hermance was elected President of the Electromechanical Group effective January 1, 2022 and has 32 years of service with AMETEK .
    Thomas C. MarecicPresident–Electronic InstrumentsNovember 5, 2014Thomas C. Marecic was elected President–Electronic Instruments effective November 5, 2014 and has 29 years of service with AMETEK .
    Thomas M. MontgomerySenior Vice President–Comptroller & Principal Accounting OfficerMay 15, 2016Thomas M. Montgomery was elected as Senior Vice President–Comptroller & Principal Accounting Officer effective May 15, 2016 and has 40 years of service with AMETEK .

    Questions to Ask Management

    1. Given the ongoing destocking and project delays in your EIG Test and Measurement businesses, can you elaborate on the specific divisions and end markets that are most affected, and how you're planning to mitigate these challenges?

    2. With one of your two large Aerospace customers experiencing production issues, how do you anticipate this will impact your Aerospace business in 2025, and what steps are you taking to adjust your outlook and strategies accordingly?

    3. Considering the regulatory complexities in restructuring Paragon Medical, can you provide an update on the timeline and the challenges faced in integrating Paragon, especially in moving production or reducing costs in this regulated environment?

    4. In the context of the semiconductor capital equipment cycle and moderating expectations due to slower recovery in consumer products, how confident are you in your ability to match or outgrow the market, given the dynamics with China and new technologies, and what are the key risks you foresee?

    5. While you have announced acquisitions like Virtek Vision and Polygon Physics, can you discuss any potential hesitation or delays you're observing in your acquisition pipeline due to higher interest rates or market uncertainties, and how this might impact your growth strategy?

    Share Repurchase Program

    Program DetailsProgram 1
    Approval DateMay 2022
    End Date/DurationN/A
    Total additional amount$1 billion
    Remaining authorization$748,135,553
    DetailsEnhance shareholder value through opportunistic repurchases

    Past Guidance

    Q3 2024 Earnings Call

    • Issued Period: Q3 2024
    • Guided Period: FY 2024 and Q4 2024
    • Guidance:
      1. Full Year 2024 Guidance:
        • Overall Sales: Expected to be up 5% to 7% versus the prior year.
        • Diluted EPS: Expected to be in the range of $6.77 to $6.82, up 6% to 7% versus the prior year.
      2. Fourth Quarter 2024 Guidance:
        • Overall Sales: Anticipated to be up mid-single digits.
        • Earnings: Expected to be in the range of $1.81 to $1.86, up 8% to 11% versus the prior year.
      3. General and Administrative Expenses: Approximately 1.5% of sales for the full year.
      4. Effective Tax Rate: Between 17% and 17.5% for 2024.
      5. Capital Expenditures: Approximately $135 million for the full year.
      6. Depreciation and Amortization: Approximately $395 million for the full year.
      7. Free Cash Flow Conversion: Approximately 115% to 120% of net income for the full year .

    Q2 2024 Earnings Call

    • Issued Period: Q2 2024
    • Guided Period: FY 2024 and Q3 2024
    • Guidance:
      1. Sales Growth: Overall sales for the full year expected to be up 5% to 7%.
      2. EPS: Diluted EPS for the year expected to be in the range of $6.70 to $6.80.
      3. Third Quarter Sales and Earnings: Sales up mid-single digits, earnings in the range of $1.60 to $1.62 per share.
      4. Free Cash Flow Conversion: Between 110% and 120% of net income.
      5. Effective Tax Rate: Between 17% and 18%.
      6. Capital Expenditures: Approximately $150 million for the full year.
      7. Depreciation and Amortization: Approximately $400 million for the year.
      8. Operating Performance: Similar to the first half of the year .

    Q1 2024 Earnings Call

    • Issued Period: Q1 2024
    • Guided Period: FY 2024 and Q2 2024
    • Guidance:
      1. Full Year 2024 Guidance:
        • EPS: Expected to be in the range of $6.74 to $6.86.
        • Sales Growth: Expected to be up low double digits.
      2. Second Quarter 2024 Guidance:
        • Sales Growth: Up mid- to high single digits.
        • EPS: Expected to be in the range of $1.63 to $1.65.
      3. General and Administrative Expenses: Approximately 1.4% of sales.
      4. Effective Tax Rate: Between 19% and 20%.
      5. Capital Expenditures: Approximately $160 million.
      6. Depreciation and Amortization: Approximately $400 million.
      7. Free Cash Flow Conversion: Between 110% and 120% of net income .

    Q4 2023 Earnings Call

    • Issued Period: Q4 2023
    • Guided Period: FY 2024 and Q1 2024
    • Guidance:
      1. Overall Sales Growth: Expected to be up low double digits.
      2. Diluted EPS: Expected to be in the range of $6.70 to $6.85.
      3. First Quarter Sales and EPS: Sales up low double digits, earnings of $1.56 to $1.60 per share.
      4. General and Administrative Expenses: Approximately 1.4% of sales.
      5. Effective Tax Rate: Between 19% and 20%.
      6. Capital Expenditures: Approximately $160 million.
      7. Depreciation and Amortization: Approximately $400 million.
      8. Free Cash Flow Conversion: Between 110% and 120% of net income.
      9. Core Margins: Up 30 basis points, with core incrementals also up about 30 basis points.
      10. Acquisition Accretion: For Paragon Medical, expected accretion is 8% to 10% in 2024 .