Colfax stock jumped 15% after releasing FY 2015 results!
Colfax Corp. (NYSE: CFX) released FY and Q4 2015 results last week and the stock price immediately jumped 15%.
Is everything fine again in this commodity related business? Not exactly!
Net sales were $1.061 billion in the fourth quarter, a decrease of 12.0% from the prior year.
Adjusted net income was $63.0 million, or $0.51 per share, compared to $89.7 million for the fourth quarter of 2014, or $0.72 per share.
But this was much better than analysts expected!
Even if the downturn in the industry is and remains brutal Colfax is a very well managed company!
On the Conference Call the new CEO Matthew L. Trerotola hinted at already announced additional cost reduction efforts to eliminate $100 million from the 2014 cost base by the end of 2016.
And he continued to announce good progress on these actions through the quarter, which will allow to recognize $50 million of incremental cost savings this year.
These measures together with other cost reductions and „Colfax Business System“ tools will allow Colfax to increase the operating margin in 2016!
Impressive as they continue to expect market headwinds!
CFO C. Scott Brannan explained the historically strong cash flow generation in the fourth quarter: „We generated $152 million in operating cash flow in the 2015 fourth quarter of which $109 million is from a reduction in working capital and this was a major contributor to the strong free cash flow for the quarter and for 2015 in total. We finished 2015 with $100 million less debt than we started the year despite the use of $200 million for acquisitions and $27 million for share repurchases.“
Colfax will continue to „advance our acquisition cultivation efforts“ as Trerotola put it. „But with current market conditions, we’re also deploying capital to attractive stock repurchases.“
A change in the commodity cycle does not seem to be in sight but Colfax is well prepared to take advantage when their industry market will change.
Colfax stock is for long term investors who believe that commodity prices will not remain that low forever!