ESCO Technologies Inc (ESE) Q4 2024 Earnings Call Highlights: Record Backlog and Strong Sales ...

In This Article:

  • Orders: Decline of 15% in the fourth quarter; record backlog of $879 million.

  • Sales: Up 9.5% in the quarter, with 8.5% organic growth and 1% from the MPE acquisition.

  • Adjusted EBIT Margins: Increased by 130 basis points to 17.4%.

  • Adjusted EPS: $1.46 per share, a 17% increase.

  • Aerospace and Defense Backlog: Over $600 million, a 24% increase.

  • Aerospace and Defense Sales: Up 16% in the quarter.

  • Utility Solutions Group Sales: Up 6% in the quarter; renewables sales growth of 9%.

  • Test Business Sales: Up 4% in the quarter; margins increased by 80 basis points to 18.3%.

  • Full Year Orders: Up 10%; sales up over 7%.

  • Full Year Adjusted EBIT: Up 14%; adjusted EPS up 13%.

  • Operating Cash Flow: Over $127 million for the full year.

  • Capital Spending: Just over $36 million for the year.

  • Share Repurchases: $8 million in 2024.

  • 2025 Sales Growth Guidance: 6% to 8%.

  • 2025 Adjusted EPS Growth Guidance: 12% to 17%.

  • First Quarter 2025 Adjusted EPS Guidance: $0.68 to $0.75.

Release Date: November 14, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

  • ESCO Technologies Inc (NYSE:ESE) achieved a significant milestone with orders and sales both surpassing $1 billion for the first time.

  • The company ended the year with a record backlog of $879 million, indicating strong future demand.

  • Sales in the fourth quarter increased by 9.5%, with 8.5% organic growth and additional growth from the MPE acquisition.

  • Adjusted EBIT margins improved by 130 basis points to 17.4%, with margin increases across all three segments.

  • The Utility Solutions Group experienced strong sales growth of 6% and margin improvement, driven by increased demand for electricity and renewable energy solutions.

Negative Points

  • Fourth quarter orders declined by 15%, primarily due to a tough comparison with high navy orders in the previous year's fourth quarter.

  • The aerospace and defense segment faced project profitability issues in the VACCO Space business, impacting financial performance.

  • The test business saw an 8.5% decline in orders, although sales and adjusted EBIT improved.

  • There is uncertainty regarding the impact of potential policy changes on renewable energy incentives, which could affect future growth.

  • The strategic review of the VACCO Space business is ongoing, with potential risks to long-term prospects if administration changes affect NASA or private contractors.

Q & A Highlights

Q: Can you provide more details on the Aerospace and Defense (A&D) outlook, particularly regarding Boeing's impact and commercial aerospace assumptions? A: We have been conservative in our forecasts, assuming a slightly lower build rate than Boeing's published rates due to historical underperformance. While there could be some impact on Boeing-specific contracts, we are confident in offsetting this with other customer work. With the Boeing strike resolved, we expect good growth this year and significant growth in the following years. - Bryan Sayler, President and CEO