Year to date, shares of Vontier (VNT) have grown by almost 10%, but this has not been enough to reach the benchmark index for the U.S. market. However, the stock is poised to grow faster over the next couple of months, with a chance to equal the benchmark before the end of 2021. Thus, I am bullish on Vontier.
Based in Raleigh, North Carolina, Vontier is a global provider of technologies and solutions for operators in the mobility infrastructure industry.
The customers of the company are fueling stations, commercial vehicle repair service providers, public organizations, and other entities responsible for local mobility, as well as owners and operators of fleets of vehicles. The company markets its products and offers its services through franchised mobile and independent distributors as well as direct sales personnel. (See VNT stock charts on TipRanks)
Q2 2021 Earnings Results
Operating activities performed well during the three month period ended on July 2.
Thanks to strong growth in the company’s orders, total revenues increased by almost 36% year-over-year to $724.6 million in the second quarter of 2021, topping analysts’ expectations by $46.41 million. This result also enabled it to beat analysts on adjusted EPS by 6 cents, since Vontier posted $0.61.
Additionally, the company said it achieved 33% growth in core revenue while the gross profit margin hit 44% for a 70-basis point jump.
Vontier’s Growth
The company is engaged in the implementation of projects to strategically diversify its the portfolio. These, if successful, will allow the business to grow steadily in the future, producing unprecedented profitability.
In line with its strategy, the company will acquire DRB Systems LLC, a leading supplier of equipment, components, and solutions to the car wash industry, for a total consideration of $ 965 million. The closing is expected by the third quarter of 2021. The company promises that the acquisition will improve some company results, already starting this year. In particular, the acquired business will add $170 million to total revenue and bring in an operating margin of 25%.
This acquisition could act as an icebreaker for Vontier to take over other businesses adjacent to the carwash industry, helping the company to pursue growth through a portfolio that expands and diversifies over the years.
Looking ahead to Full 2021
Vontier said that its adjusted EPS is expected to be between $2.77 and $2.82 in full year 2021, which will reflect a 12.1-14.2% increase from $2.47 in full 2020. Analysts forecast that Vontier’s adjusted EPS will fluctuate in the $2.72 – $2.83 range, for an average estimate of $2.80.
Wall Street’s Take on Vontier
In the last 3 months, eight Wall Street analysts issued 12-month price targets for Vontier. The average Vontier price target is $44.38 apiece, versus the closing price of $36.41 on August 30. The price target implies a nearly 22% upside. The analyst rating consensus is a Strong Buy, based on 7 Buy and 1 Hold ratings.
Summary
Vontier has grown less than the benchmark index for the U.S. market so far. However, if its strategy to pursue growth through mergers and acquisitions succeeds, the company could potentially perform steadily above the market average.
The company believes that a more diversified and expanded portfolio of businesses will put it in a better position to benefit from tailwinds, leading to improved profit margins.
Disclosure: At the time of publication, Alberto Abaterusso did not have a position in any of the securities mentioned in this article.
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