Q4 2023 Earnings Summary
- AMETEK's strategic acquisitions, including Paragon Medical, have expanded its presence in the growing MedTech market to 21% of sales, with plans to further grow this segment.
- The company expects high single-digit organic growth in its Aerospace & Defense businesses in 2024, driven by strong demand in both commercial aerospace and defense sectors.
- AMETEK's advanced technology in semiconductor equipment is driving growth despite industry downturns, with semiconductor-related sales up 10% in 2023 and expected to grow mid-single digits in 2024.
- AMETEK expects reported operating margins to decrease by approximately 50 basis points in 2024 due to acquisition dilution.
- The Automation & Engineered Solutions segment experienced a mid-single-digit decrease in organic sales due to inventory normalization at OEM customers, which is expected to continue into the first half of 2024.
- Orders are currently trailing sales, with expectations that this trend will persist in the first quarter due to difficult comparisons, potentially indicating near-term demand weakness.
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EMG Inventory Normalization
Q: When will EMG inventory levels normalize?
A: We expect OEM destocking to continue through the first half of the year, with difficult comps in Q1 that will finish in Q2. We anticipate stronger performance in the second half, as some customers have already corrected their inventory levels. -
Pricing and Inflation
Q: What are price capture expectations for 2024?
A: In Q4, price was about 5% of sales, with total inflation at 3.5%. For 2024, we anticipate pricing to be about 3% across the portfolio and inflation at about 2.5%, maintaining a positive spread as inflation decreases. -
Paragon EPS Impact
Q: What is Paragon's EPS impact in 2024?
A: We expect Paragon to contribute $0.08 to $0.10 in earnings per share in 2024. Growth will be back-end loaded as we integrate and potentially prune less profitable product areas in the first half, with stronger performance anticipated in the second half due to exciting new product introductions. -
Semiconductor Market Outlook
Q: What is the outlook for the semiconductor business?
A: Despite the memory downturn, our exceptional technology in the CAMECA and Zygo businesses led to 10% growth in 2023. We expect additional growth of plus mid-single digits in 2024, offsetting weakness in the memory segment with strong positions in research optics and EUV applications. -
Margin Expectations
Q: How will margins trend in 2024?
A: Core margins are expected to be up 30 basis points in 2024, with core incrementals up the same. As-reported margins will be down about 50 basis points due to acquisition dilution. We anticipate continued margin growth, though it will moderate compared to 2023. -
China Sales and Outlook
Q: How did China perform and what's the 2024 outlook?
A: China sales were up 22% in Q4, with strong growth in our Materials Analysis and Ultra Precision Technology divisions. For 2024, we expect China to be flat due to some one-off projects that benefited us in 2023, but overall growth in Asia will continue. -
M&A Activity
Q: What's the status of M&A and future opportunities?
A: We deployed $2.25 billion across five strategic acquisitions, expanding our presence in attractive growth markets. Our pipeline remains strong, and we're actively pursuing high-quality deals, with opportunities likely in the second, third, and fourth quarters. -
Key End Markets
Q: Can you update us on key end markets and demand?
A: Process businesses had organic sales up low single digits in Q4. Aerospace & Defense saw organic growth up high single digits, balanced across commercial and defense sectors. Power businesses were up low double digits, while Automation & Engineered Solutions faced a mid-single-digit decrease due to inventory normalization but expect stronger growth in the second half of 2024. -
Growth Investments
Q: How are you investing the $100 million in growth?
A: We're investing about $100 million in growth initiatives across our best opportunities. Our R&D spending is just under 5.5% of sales, and we plan to spend $400 million on research, development, and engineering in 2024, up a healthy double-digit amount. -
Med Tech Exposure
Q: How does Paragon affect your medical exposure?
A: With the Paragon acquisition, med tech now represents about 21% of our sales. We aim to further increase this percentage and continue to seek acquisitions in the space, leveraging technology and engineering to win in the market.