Colfax Corp. continues the transformation process of the company
Colfax Corp. (NYSE: CFX) released Q1 2019 results.
After the acquisition of DJO Global completed in February 2019 Colfax is now a company which operates in 3 segments:
Orthopedics, Fabrication Technology and Air & Gas Handling
Adjusted earnings were $ 0.53 , 10.4% higher than in the year ago quarter.
The major contribution to the 14.4% revenue growth this quarter came from the acquired orthopedics business growing 19.2% in comparison to the 1.6% growth in existing businesses.
CEO Trerotola pointed out on the conference call that „DJO launched six new products in the first quarter that will contribute to an improving growth trajectory later this year and in 2020“.
But he also pointed out that Colfax „made significant improvements in the Air & Gas Handling business that are now leading through with consistent growth in orders and margins and the business is expected to return to top-line growth in the second half.“
As Colfax intends to sell this business this certainly helps to get a better price.
The balance sheet quality deteriorated. Long-term debt balance increased substantially to $4,037.1 million from $1,192.4 million in the previous quarter as Colfax already bought DJO Global but did not sell yet the Air&Gas Handling business.
But this can be expected within the next several months and the balance sheet will improve.
This means for investors that the transformation process of Colfax will most likely continue for a couple of quarters more.
Will management be able to transform DJO Global into a growth story?
Will fabrication technology continue to be a slow grower?
For 2019 Colfax anticipates adjusted earnings of $ 2.55-$2.65 .
At today’s price of $26.77 this translates into a p/e ratio of just 10 !
This looks cheap but Colfax still isn’t the growth story it once has been.
Even if this 1st quarter has been solid, investors should wait until more signs of improvement emerge. Until then Colfax remains a hold!