Ametek Earnings: Strong EIG Margins Cause Us to Modestly Lift Our Fair Value Estimate

Following narrow-moat-rated Ametek’s third-quarter results, we lift our fair value estimate to $153 from $149. The fair value raise is partly due to a 50-basis-point lift in our midcycle operating margins and partly due to time value of money. Ametek’s electrical instruments group supported our margin increase, as that business has both reached higher margins and has maintained a higher level of performance than in years past. EIG margins rose 360 basis points to 29.5%, materially exceeding our expectations. Despite a slight consolidated sales miss compared with what we had penciled in, EIG sales were still strong, and volume leverage drove its operating margin expansion. Both M&A and organic sales contributed evenly to EIG’s 8% year-on-year sales rise.