AMETEK, Inc. (NYSE:AME) Q4 2022 Earnings Call Transcript

Dave Zapico: Yes, I think that what you’re going to see, there’s still an elevated level of inflation. But at the same time, some of the one-time distributor purchases of inventory are going to go away. So, there’s going to be some natural tailwinds for us in terms of margins, we expect that working in the P&L in our budget model, our productivity/cost savings of about $110 million. So, we think it’ll be substantial. And that’s where we’re starting out the year but we think there’s maybe even some upside to that. And it’s largely related to a, and there is a couple of opposing forces, you’re dealing with inflation and some costs of things are still going up. But at the same time, some of the supply chain issues are working the other way and especially the higher prices that we paid on a one-time basis to some of the electronics distributors to continue shipping products.

David Ridley-Lane: Got it and then you have been adding capacity through 2022, I guess in the CapEx, what’s kind of growth versus maintenance or whatever framework you want to use to discuss kind of how you’re thinking about capacity additions here in 2022?

Dave Zapico: We added a lot of capacity in 2022, we brought some low cost region facilities online, we’ve talked about that. For 2023, we expect our capital expenditures to be flat, a little bit more than 2% of sales, as we’ve done historically. So, and it’s a good balance between growth CapEx, maintenance CapEx and CapEx funding cost reductions.

David Ridley-Lane: Then, if I could get one more in, what is your expected EPS contribution from Navitar and RTDS?

Dave Zapico: Yes, I’m not going to break out the deal, but there’ll be slightly accretive.

David Ridley-Lane: Thank you very much.

Dave Zapico: Okay, thank you, David.

Operator: And our next question today comes from Joe Giordano with Cowen. Please go ahead.

Joe Giordano: Yes, you mentioned — you mentioned customers kind of getting normalized on their behavior and their ordering patterns, like, can you maybe get a little bit finer point on that? And like, what you’re seeing, are actual things getting pushed out, or are they just ordering more real times?

Dave Zapico: Yes, if you think about it from the customer’s view, they’ve kind of got trained by the pandemic, to order things early. And now, most companies are getting including AMETEK is getting back to being able to deliver in lead time. And in fact, that’s part of the reason that we grow our businesses at a faster rate during the pandemic period, we were able to ship and deliver and we had the inventory buffer. So, what’s happening is, as customers normalize their buying patterns, they don’t have to order early anymore. And that’s what’s really happening, I think across the broader supply chain, and we’re seeing that. So, that’s the main normalization that we’re talking about.

Joe Giordano: And then when you mentioned the M&A pipeline looks good. How do you think about timing of execution, just given the macro year, given it looks like industrial is getting lighter, is getting weaker and are you relying on trailing 12 results that might be different than forward 12 for acquired for companies that you’re looking at. So, how does it impact your desire to do be actionable right now, given where we are in the business cycle?