AME Q2 2025: 6% Order Growth, EMG Drives Margin Boost
- Robust Orders and Backlog: The Q&A revealed orders growing by 6% overall with the EMG business, including Paragon and automation, showing particularly strong results and a record backlog. This robust order intake supports expectations for future top-line growth as shipments follow several months later.
- Accretive Acquisition Synergies: Management highlighted that integration of recent acquisitions, such as Ferro Technologies, is expected to deliver a couple of pennies EPS benefit in 2025 and significant margin expansion through mid-teens cost synergies. This builds on prior successful integrations like Zygote, positioning the company for enhanced profitability.
- Strong Liquidity Enabling Growth: The company’s robust financial position—with over $2,000 million in cash and available credit facilities and potential leverage for aggressive future acquisitions—underpins its long-term growth strategy and supports strategic investments to drive additional revenue and margin improvements.
- Tariff uncertainty and delay risks: There is notable uncertainty around the impact of tariffs, with unresolved issues—such as a $70,000,000 exposure on U.S.-to-China instrumentation—that could delay order shipments and negatively affect near-term revenue and margins.
- Exposure to weak segments: AMETEK’s process and analytical businesses face headwinds, particularly in the research and semiconductor markets (research representing about 10% of revenue), where delayed funding and reduced spending in academia and government could continue to weigh on overall performance.
- Modest near-term benefits from acquisitions: The integration of recent acquisitions, including the FARO deal, is expected to contribute only a couple of pennies to earnings in 2025, highlighting potential risks that synergy targets may take longer to materialize, which could pressure expected margin improvements.
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Sales Growth (%) | Q3 2025 | no prior guidance | Mid-single digits | no prior guidance |
Diluted EPS ($) | Q3 2025 | no prior guidance | $1.72 to $1.76 | no prior guidance |
Sales Growth | FY 2025 | up low single digits | Mid-single digits | raised |
Diluted EPS | FY 2025 | $7.20 to $7.18 | $7.06 to $7.20 | lowered |
Effective Tax Rate (%) | FY 2025 | 19% to 20% | 19% to 19.5% | lowered |
Capital Expenditures ($) | FY 2025 | $155 million | $160 million | raised |
Depreciation and Amortization ($) | FY 2025 | $410 million including after-tax acquisition-related intangible amortization of $203 million or $0.88 per diluted share | $425 million including after-tax acquisition-related intangible amortization of $210 million or $0.91 per diluted share | raised |
Free Cash Flow Conversion (%) | FY 2025 | 115% of net income | 115% of net income | no change |
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Acquisition Synergies
Q: What are the synergy benefits from Ferro?
A: Management expects roughly a 2-cent EPS benefit in 2025 as Ferro integrates, achieving mid-teens cost synergies and aiming to double EBITDA margins from 15% to 30% in three years, much like the past Zygote integration. -
Margin Outlook
Q: How are operating margins trending across segments?
A: They highlighted robust core margin expansion—with EMG core margins up 260 basis points and overall improvements in both EMG and EIG—supported by positive pricing and offset tariff benefits, reinforcing strong profitability. -
Automation & Paragon
Q: How are automation and Paragon performing?
A: Management reported robust order growth and completed destocking, with Paragon achieving 30% EBITDA margins and automation contributing significantly to EMG’s profitability, driving an encouraging turnaround. -
M&A Pipeline
Q: What is the future acquisition outlook?
A: The pipeline remains strong with around $1 billion in recent deals and ample liquidity—with available funds between $2 billion and $5 billion—to deploy on high-quality opportunities, underlining disciplined M&A growth. -
China Demand
Q: Was there a China demand pull forward this quarter?
A: Management noted minimal pull forward in China; revenue was down by low single digits due to project funding delays amid tariff uncertainty, resulting in no significant acceleration of shipments.
Research analysts covering AMETEK INC/.