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01/09 23:13
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call summary presents a mixed picture. Financial performance shows modest growth, with challenges from tariffs and market conditions. Product development and business updates are positive, especially in bioprocessing. Market strategy is cautious due to global uncertainties. Expenses indicate some margin pressure. Shareholder returns are not prominently discussed. The Q&A reveals cautious guidance for 2026 and strategies to mitigate tariffs. Overall, the sentiment is balanced, with no strong catalysts for a significant stock price move. The neutral rating reflects these mixed signals.
Sales Sales in the quarter were $1.03 billion, which represented an increase in local currency of 6% and was 5%, excluding several recently completed acquisitions. On a U.S. dollar reported basis, sales increased 8%. Local currency sales increased 10% in the Americas, 6% in Europe, and 1% in Asia/Rest of the World. Local currency sales in China increased 2% during the quarter.
Laboratory Sales Laboratory sales increased 4% in the quarter.
Industrial Sales Industrial sales increased 9% in the quarter, including a 1% benefit from recent acquisitions. Excluding acquisitions, core Industrial grew 10%.
Product Inspection Sales Product Inspection grew 7% in the quarter.
Food Retail Sales Food Retail grew 5% in the quarter.
Service Sales Service grew 8% in the quarter, including a 1% benefit from acquisitions.
Gross Margin Gross margin was 59.2% in the quarter, a decrease of 80 basis points, primarily due to incremental tariff costs, offset in part by positive price realization and benefits from the Stern Drive program.
R&D Expenses R&D amounted to $51.1 million in the quarter, a 4% increase in local currency over the prior year.
SG&A Expenses SG&A amounted to $248.4 million, a 6% increase in local currency over the prior year, which includes sales and marketing investments.
Adjusted Operating Profit Adjusted operating profit amounted to $309.9 million in the quarter, up 5% versus the prior year.
Adjusted Operating Margin Adjusted operating margin was 30.1%, a decrease of 100 basis points or down 30 basis points on a currency-neutral basis versus the prior year. Gross impact of tariffs reduced operating margin by 140 basis points.
Amortization Amortization amounted to $20 million in the quarter.
Interest Expense Interest expense was $17.7 million in the quarter.
Adjusted Other Income Adjusted other income amounted to $4.3 million in the quarter.
Effective Tax Rate Effective tax rate was 19% in the quarter, before discrete items and adjusted for the timing of stock option exercises.
Fully Diluted Shares Fully diluted shares amounted to $20.6 million, approximately a 3% decline from the prior year.
Adjusted EPS Adjusted EPS for the quarter was $11.15, a 9% increase over the prior year. Incremental tariff costs were a gross headwind to EPS of 6%.
Reported EPS On a reported basis, EPS was $10.57 compared to $9.96 in the prior year. Reported EPS included $0.26 of purchase intangible amortization, $0.29 of restructuring and acquisition transaction costs, and a $0.03 tax headwind related to the timing of stock option exercises.
Adjusted Free Cash Flow Adjusted free cash flow amounted to $689.5 million for the first 9 months, a 6% increase on a per share basis.
NineFocus pH Meter: A new high-performance multiparameter benchtop meter for pH, conductivity, ion concentration, and dissolved oxygen measurements. It supports regulatory compliance and automates data transfer to LabX software. It can be paired with the InMotion autosampler for fully automated calibration, verification, and measurement of over 300 samples.
Geographic Expansion: Strong growth in the Americas, especially in Industrial Solutions. Europe showed very good results, particularly in Industrial business, while Asia and the Rest of the World grew modestly. Emerging markets outside of China are now larger than China and show significant growth potential.
Spinnaker Sales and Marketing Program: Continued strong traction with deployment of new digital solutions to improve customer digital experience and optimize pipeline management using AI.
Blue Ocean Program: Provides globally harmonized processes with integrated ERP and CRM systems, enabling effective digitalization and internal productivity improvements.
Supply Chain Optimization: Focus on in-region, for-region manufacturing capabilities to increase flexibility and resiliency, aiming to fully offset incremental tariff costs by 2026.
Acquisitions: Completed several small acquisitions to broaden distribution and service capabilities and expand the life science equipment portfolio. These acquisitions will add less than 1% to sales growth in 2026 but enhance product and service offerings.
Focus on Automation, Digitalization, and Near-shoring: Investments in these areas are expected to drive growth and operational excellence over the coming years.
Global Trade Disputes and Governmental Policies: The company faces uncertainties in global trade disputes and governmental policies, which could impact operations and financial performance.
Tariff Costs: Incremental tariff costs have reduced gross margin and operating margin, creating a headwind to EPS growth.
Market Conditions: Challenging market conditions, including geopolitical tensions and economic uncertainties, are expected to persist, impacting sales growth and operational performance.
China Market Challenges: The business in China has faced challenges due to central government efforts to reduce excess capacity in certain industries, leading to modest growth.
Supply Chain Optimization: The company is navigating challenges with trade tariffs and is focusing on strengthening in-region manufacturing capabilities to increase flexibility and resiliency.
Soft Demand in Specific Sectors: Softer demand from academia, biotech, and chemical sectors has offset growth in other areas, impacting overall performance.
Industrial Market Conditions: Global market conditions for industrials are soft, with sales expected to grow only in low single digits in the near term.
Food Manufacturing Industry Challenges: Challenging market conditions in the food manufacturing industry could impact growth in the Product Inspection segment.
Currency and Foreign Exchange: Currency fluctuations are expected to have a slight headwind on EPS in 2026, despite being a benefit to sales.
Fourth Quarter 2025 Guidance: Local currency sales are expected to grow approximately 3%. Operating margin is expected to decrease approximately 200 basis points due to higher tariff costs. Adjusted EPS is forecasted to be in the range of $12.68 to $12.88, representing a growth rate of 2% to 4%. Currency is expected to be neutral to adjusted EPS.
Full Year 2025 Guidance: Local currency sales growth is forecasted at approximately 2%, or 3.5% excluding shipping delays. Adjusted EPS is expected to be in the range of $42.05 to $42.25, representing a growth rate of 2% to 3%, or 6% to 7% excluding prior year shipping delays. Adjusted EPS includes a gross headwind of approximately 5% from higher tariff costs.
Initial 2026 Guidance: Local currency sales are expected to increase approximately 4%. Adjusted EPS is forecasted to be in the range of $45.35 to $46, representing a growth rate of 8% to 9%. Foreign exchange is estimated to be a 1% benefit to sales and a slight headwind to EPS. Free cash flow is expected to be approximately $900 million.
Market Conditions and Strategic Investments: Market conditions are expected to remain challenging with uncertainties related to trade disputes, governmental policies, and geopolitical tensions. No significant improvement in market conditions is assumed for 2026. Investments in automation, digitalization, and near-shoring are expected to position the company for growth over the coming years.
China and Emerging Markets Outlook: Business in China grew modestly in the quarter, with growth in the industrial business for the first time in over two years. Conditions in China are expected to remain challenging, but the company is well-positioned to capture growth as conditions improve. Emerging markets outside of China are now larger than China and are expected to provide significant growth potential.
Supply Chain Optimization: The company expects to fully offset incremental tariff costs in 2026 through supply chain optimization strategies, including strengthening in-region, for-region manufacturing capabilities to increase flexibility and resiliency.
Share Repurchase Program: Share repurchases are now expected to be $800 million for the full year 2025 and share repurchases in 2026 are expected to be in the range of $825 million to $875 million. Our Board has also authorized an additional $2.75 billion to be added to our share repurchase program, which had $1.1 billion remaining at the end of the third quarter.
The earnings call summary presents a mixed picture. Financial performance shows modest growth, with challenges from tariffs and market conditions. Product development and business updates are positive, especially in bioprocessing. Market strategy is cautious due to global uncertainties. Expenses indicate some margin pressure. Shareholder returns are not prominently discussed. The Q&A reveals cautious guidance for 2026 and strategies to mitigate tariffs. Overall, the sentiment is balanced, with no strong catalysts for a significant stock price move. The neutral rating reflects these mixed signals.
The earnings call presents mixed signals: strong product inspection growth and raised forecasts contrast with lower EPS guidance and declining free cash flow. Management's confidence in offsetting tariff impacts and stable demand in China are positives, but uncertainties in process analytics and the replacement cycle remain. The lack of detailed guidance on key areas and cautious outlook for Europe and China suggest a neutral sentiment, with limited short-term stock movement expected.
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