Earnings call transcript: Ametek Q2 2025 beats earnings expectations

Ametek Inc. reported strong financial results for the second quarter of 2025, surpassing analyst expectations with an earnings per share (EPS) of $1.78 compared to the forecasted $1.69. The company also exceeded revenue projections, reporting $1.78 billion against an anticipated $1.73 billion. Following these positive results, Ametek’s stock price rose by 5.47% in pre-market trading, reflecting investor confidence in the company’s performance and outlook.

Key Takeaways

• Ametek reported record Q2 sales of $1.78 billion, up 2.5% year-over-year.
• EPS of $1.78 exceeded forecasts, marking a 7% increase from the previous year.
• The stock price surged by 5.47% in pre-market trading following the earnings announcement.
• The company raised its full-year EPS guidance to $7.06-$7.20.
• Ametek acquired FARO Technologies for $920 million, enhancing its product offerings.

Company Performance

Ametek demonstrated robust performance in Q2 2025, achieving record sales and strong earnings growth. The company’s focus on innovation and strategic acquisitions contributed to its positive results. Ametek’s diversified portfolio and strong positions in key markets, such as metrology and precision measurement, have helped it navigate industry challenges effectively.

Financial Highlights

• Revenue: $1.78 billion, up 2.5% year-over-year
• Earnings per share: $1.78, up 7% from the previous year
• Operating income: $462 million, up 3%
• Operating margins: 26%, up 20 basis points
• EBITDA: $565 million, up 4%

Earnings vs. Forecast

Ametek’s EPS of $1.78 surpassed the forecast of $1.69 by 5.33%, and revenue of $1.78 billion exceeded expectations by 2.89%. This marks a continuation of the company’s trend of outperforming market predictions, driven by strong operational execution and strategic growth initiatives.

Market Reaction

Following the earnings announcement, Ametek’s stock price increased by 5.47% to $180.9 in pre-market trading. This rise reflects investor optimism about the company’s future prospects and its ability to deliver consistent growth. The stock is currently trading closer to its 52-week high of $198.33, indicating strong market confidence.

Outlook & Guidance

Ametek has raised its full-year EPS guidance to a range of $7.06-$7.20, signaling confidence in its continued growth trajectory. The company anticipates mid-single-digit sales growth for the year, with organic growth expected in the low single digits. Ametek remains focused on strategic acquisitions and innovation, with a robust M&A pipeline supported by $2 billion in cash and credit facilities.

Executive Commentary

"Our businesses are well positioned with differentiated technology solutions serving a diverse set of growing niche markets," said Dave Zapico, CEO of Ametek. He also highlighted the company’s proven strategies for navigating uncertain environments, emphasizing a focus on core advantages rather than high-risk ventures.

Risks and Challenges

• Potential supply chain disruptions could impact production and delivery timelines.
• Market uncertainties in China and the research sectors may affect revenue streams.
• Semiconductor and research markets are experiencing headwinds, posing challenges to growth.
• Geopolitical tensions and tariff changes could influence cost structures and profitability.

Q&A

During the earnings call, analysts inquired about Ametek’s strategies for mitigating tariffs and the potential of the FARO Technologies acquisition. The company addressed concerns about market uncertainties in China and highlighted strong order momentum in recent months, reinforcing its positive outlook.

Full transcript - Ametek Inc (AME) Q2 2025:

Towanda, Conference Operator: Hello, and welcome to AMETEK’s Second Quarter twenty twenty five Earnings Conference Call. At this time, all participants are in a listen only mode. After the speakers’ presentation, there will be a question and answer session. To ask the question during the session, you would need to press 11 on your telephone. You would then hear an automated message advising your hand is raised.

I would now like to turn the conference over to Kevin Coleman, Vice President of Investor Relations and Treasurer. Sir, you may begin.

Kevin Coleman, Vice President of Investor Relations and Treasurer, AMETEK: Thank you, Towanda. Good morning, and welcome to AMETEK’s second quarter twenty twenty five earnings conference call. Joining me today are Dave Zapico, Chairman and Chief Executive Officer and Dala Puri, Executive Vice President and Chief Financial Officer. During the course of today’s call, we will be making forward looking statements, which are subject to change based on various risk factors and uncertainties that may cause actual results to differ significantly from expectations. A detailed discussion of the risks and uncertainties that may affect our future results is contained in AMETEK’s filings with the SEC.

AMETEK disclaims any intention or obligation to update or revise any forward looking statements. Any references made on this call to 2024 or 2025 results will be on an adjusted basis, excluding after tax acquisition related intangible amortization and excluding a pretax $29,200,000 or $0.10 per diluted share charge in the 2024 for integration costs related to the Paragon Medical acquisition. Reconciliations between GAAP and adjusted measures can be found in our press release and on the Investors section of our website. We’ll begin today’s call with prepared remarks, and then we’ll open it up for your questions. I’ll now turn the meeting over to Dave.

Dave Zapico, Chairman and Chief Executive Officer, AMETEK: Thank you, Kevin, and good morning, everyone. AMETEK delivered strong second quarter results, highlighted by record level sales and EBITDA, strong core margin expansion and excellent earnings growth. We also raised our full year sales and earnings guidance to reflect our second quarter results and the recent acquisition of Ferro Technologies. The addition of Ferro Technologies nicely complements our existing metrology and precision measurement businesses. Our ability to deliver strong operating performance is notable given the challenging macro environment and is a testament to the quality of our differentiated businesses, the strength of our operating capabilities, and the contribution from all AMETEK colleagues.

Now, let me turn to our second quarter financial results. Sales were a record $1,780,000,000 an increase of 2.5% from the 2024. Organic sales were flat, acquisitions added 1.5 points and foreign currency translation was a one point benefit. Book to bill in the quarter was one point zero zero and we ended the second quarter with a backlog of $3,470,000,000 near record levels. Our operating performance in the quarter was excellent, leading to strong margin expansion and earnings growth.

Operating income in the quarter was $462,000,000 a 3% increase over the 2024. Operating margins were 26% in the quarter, up 20 basis points from the prior year. Core margins, excluding the dilutive impact from acquisitions and the impact of foreign currency, were very strong at 26.7%, up 90 basis points versus the prior year. EBITDA in the quarter was a record $565,000,000 up 4% versus the prior year, with EBITDA margins an impressive 31.8%. This operating performance led to earnings of $1.78 per diluted share up 7% versus the 2024.

Now let me provide some additional details at the operating group level. First, the Electronic Instruments Group. The Electronic Instruments Group delivered solid operating performance in the second quarter. EIG sales were $1,160,000,000 up 1% from last year’s second quarter. Organic sales were down 3%.

Acquisitions added two points and foreign currency was a one point tailwind. EIG operating income was $344,000,000 and operating margins were 29.7%, with core margins a very strong 30.7%, up 40 basis points versus the prior year. The Electromechanical Group had an excellent quarter with strong sales and orders growth, record operating income and sizable margin expansion in the quarter. EMG second quarter sales were a record $618,000,000 up 6% from the prior year. Organic sales were up 5% and foreign currency was a one point tailwind.

Additionally, orders were again strong in the quarter with notable order strength within our Paragon and Automation businesses. EMG’s operating income in the second quarter was a record $144,000,000 up 17% compared to the prior year. EMG’s operating margins were 23.3%, up two ten basis points from the 2024, with core margins up an impressive two sixty basis points. Our businesses continue to execute well, delivering strong operating results against the backdrop of a challenging macro environment. Our business model allows us to react quickly to changing economic conditions, while ensuring we remain focused on delivering long term sustainable growth.

We’re committed to making strategic growth of these investments across our businesses to help support and accelerate progress. For all of 2025, we continue to expect to invest an incremental $85,000,000 in strategic growth initiatives across the company, with these investments focused on research, development and engineering and sales and marketing. These efforts and our commitment to innovation ensure a steady stream of new products that support our customers’ critical applications and position us for continued success. Our vitality index, was 26% in the quarter, continues to reflect the success of our technology innovation strategy. I want to take a moment to highlight a recent new product introduction from our SPECTRO Analytical Instruments business.

SPECTRO Analytical Instruments is a leading global provider of advanced instrumentation solutions for highly precise and accurate elemental analysis. This new product, the SPECTRO Green MS, is their latest solution designed for high performance elemental analysis. It addresses a key challenge in environmental and pharmaceutical laboratories by simplifying the process of analyzing complex samples for trace elements. The new product incorporates several innovations that improve workflow and efficiency, including its ability to analyze both high concentration and trace elements in a single measurement, significantly reducing analysis time for busy labs. With this new product launch, SPECTRO Analytical continues to advance its technology leadership and provide customers with greater speed, accuracy, and ease of use for their critical applications.

This is just one of the many innovative new product introductions across our business. Now switching to capital deployment. As noted, we acquired FARO Technologies subsequent to the end of the second quarter for approximately $920,000,000 FARO is a leading provider of advanced three d metrology and digital reality solutions. Their technology solutions, which include measurement arms, laser scanners, and integrated software platforms, enable customers in end markets, including aerospace and defense, public safety, and architecture and engineering, to precisely measure and visualize physical environments for a wide range of critical applications. FARO’s product suite nicely complements our existing metrology and precision imaging capabilities, particularly within our Creoform business, providing the most comprehensive portfolio of automated three d metrology, laser projection, and digital reality solutions.

This acquisition provides AMETEK with a significant presence in the fast growing digital reality market and has a strong recurring revenue profile through its service and cloud based subscriptions. We see significant potential to expand operating margins through integration into AMETEK’s global infrastructure and operating model. FARO has annual sales of approximately $340,000,000 We’re very pleased to welcome the FARO team to AMETEK and excited for the future. Strategic acquisitions are a core component of the AMETEK growth model, and we are committed to deploying our strong cash flow to expand our portfolio in highly attractive market segments. Looking ahead, our acquisition pipeline remains robust, and Valop will detail we have a very strong and flexible balance sheet.

We anticipate remaining active in this area. Finally, a comment on the global trade landscape. While the situation remains fluid, our businesses have been proactive in addressing the potential impacts of tariffs. As we highlighted last quarter, we have well defined mitigation plans that are being executed across the organization. These actions are multifaceted and include targeted pricing initiatives, strategic adjustments to our global supply chains, and leveraging our worldwide manufacturing footprint to localize production.

Our teams are also identifying opportunities to utilize our U. S. Manufacturing presence to support global customers looking to localize or re shore their supply chains. AMETEK’s diversification across end markets and geographies limits our dependence on any single region, and our decentralized structure allows for the flexibility needed to implement these mitigation actions quickly and effectively. We have a proven playbook for navigating through these uncertain environments and we are making outstanding progress.

Our focus remains on supporting our customers, delivering strong results and utilizing our strong financial position to invest in our long term growth initiatives and strategic acquisitions. Now turning to our outlook for the remainder of the year. Given our results in the second quarter and the closing of Ferro Technologies, we now expect full year sales to be up mid single digits on a percentage basis compared to 2024. Diluted earnings per share for the year are now expected to be in the range of $7.06 to $7.2 up 3% to 5% versus the prior year. This is an increase from our previous guidance range of $7.2 to $7.18 per diluted share.

For the third quarter, we anticipate overall sales to be up mid single digits with earnings in the range of 1.72 to $1.76 per share, up 4% to 6% versus the prior year. Our full year and third quarter guidance incorporates the expected contributions from the Ferro acquisition. In summary, AMETEK delivered strong second quarter results. Our businesses are well positioned with differentiated technology solutions serving a diverse set of growing niche markets. We have a durable operating model and an ability to react quickly to changing market dynamics.

Our strong cash flows provide us with the opportunity to deploy meaningful capital on strategic acquisitions. AMETEK remains firmly positioned to deliver a long term sustainable growth and strong returns for our shareholders. I will now turn it over to Dalip Puri, who will cover some of the financial details of the quarter, then we’ll be glad to take your questions. Dalip?

Dalip Puri, Executive Vice President and Chief Financial Officer, AMETEK: Thank you, Dave, and good morning, everyone. As Dave noted, AMETEK had a solid second quarter, highlighted by excellent operating performance, robust core margin expansion and strong earnings growth. Now let me provide some additional financial highlights for the second quarter. Second quarter general and administrative expenses were $27,000,000 or 1.5% of sales, in line with last year’s second quarter. Second quarter interest expense was $17,000,000 Second quarter other expense was higher by approximately $3,000,000 versus the prior period due to lower pension income and foreign exchange movement.

The effective tax rate in the quarter was 19%, in line with the 2024. For 2025, we now anticipate our effective tax rate to be between 1919.5%. As we have stated in the past, actual quarterly tax rates can differ dramatically either positively or negatively from this full year estimated rate. The recently enacted Tax Reconciliation Bill aligns well with our U. S.-based manufacturing footprint and innovation led growth model.

While we are continuing to assess the full implications, we expect it to favorably impact our cash tax position. Capital expenditures in the second quarter were $29,000,000 and we now expect capital expenditures to be approximately $160,000,000 for the full year or about 2% of sales. Depreciation and amortization expense in the quarter was $108,000,000 For the full year, we expect depreciation and amortization to be approximately $425,000,000 including after tax acquisition related intangible amortization of approximately $210,000,000 or $0.91 per diluted share. Operating working capital in the second quarter was 18.6% of sales, in line with the 2024. Operating cash flow was $359,000,000 in the quarter and free cash flow was $330,000,000 Year to date free cash flow conversion was 102% of net income.

For 2025, we continue to expect strong free cash flow conversion of approximately 115% of net income. Total debt at June 30 was $1,900,000,000 down from $2,100,000,000 at the 2024. Offsetting this debt was cash and cash equivalents of $620,000,000 At the end of the second quarter, our gross debt to EBITDA ratio was 0.85 and our net debt to EBITDA ratio was 0.6. Pro form a for the acquisition of Faroe, our gross debt to EBITDA ratio increases modestly from 0.85 to 1.25. With respect to our recent acquisition of Faroe, we will be excluding any one time acquisition related costs and restructuring charges from adjusted cash EPS starting in the third quarter.

This approach will also be consistently applied to all future acquisitions, ensuring comparability and clarity in our non GAAP financial reporting. We continue to have significant financial capacity and flexibility with over $2,000,000,000 of cash and available credit facilities to support our growth initiatives and to further deploy on strategic acquisitions. In summary, AMETEK had a solid second quarter, delivering strong results including robust margin expansion and earnings growth. Our leading positions across attractive market segments combined with our strong balance sheet and outstanding global operating capabilities leave us very well positioned to navigate the current environment and deliver on our growth strategies. Kevin?

Kevin Coleman, Vice President of Investor Relations and Treasurer, AMETEK: Thanks, Dollop. Towanda, could we please open the lines for questions?

Towanda, Conference Operator: Thank Our first question comes from the line of Deane Dray with RBC. Your line is open.

Deane Dray, Analyst, RBC: Thank you. Good morning, everyone.

Dave Zapico, Chairman and Chief Executive Officer, AMETEK: Good morning, Deane.

Deane Dray, Analyst, RBC: Hey, can we start off with the end market and regional tour? And given all of the fluid trading environment, it’s really interesting to get your perspective on kind of the puts and takes. And Dave, could you also include the cadence of the months? Because we’ve heard reports recently where it was choppy month to month. And I know you’ve got some perspective there.

We heard June was down, but then July came back. I don’t know if that was a pattern you saw. So a bit to unpack there. Thank you.

Dave Zapico, Chairman and Chief Executive Officer, AMETEK: Yeah, I’ll try to hit all three of those, I’ll start with the tour around the company. Our overall sales for our process businesses were flat year over year as a contribution from recent acquisitions offset a 4% decline in organic sales. The trade dynamics and back and forth negotiations continued to create uncertainty and hesitation in project spending. But we remain very encouraged by a strong pipeline of underlying project activity across our businesses. And given this, we now expect organic sales for our process businesses to be flat to down low single digits for the full year.

Switching to aerospace and defense. Our aerospace delivered businesses delivered another very strong quarter with both overall and organic sales growth increasing high single digits. Growth was broad based across all sub segments in the quarter. All sub segments, I underline that, with commercial OEM seeing the strongest growth. For the full year 2025, we now expect organic sales for our aerospace and defense businesses to be up high single digits.

So we increased that for mid single digits, feeling really good about that. Our power businesses reported low single digit increase in both overall and organic sales for the quarter. Given our strong position serving energy, grid modernization, electrification applications, we’re well positioned for long term growth. And for the full year, we now expect organic sales for our Power and Industrial businesses to be up low single digits compared to the prior year. So we increased that also from flat.

So good strength in our A and D business, good strength in our Power and Industrial businesses. And then finally, our Automation and Engineered Solutions. Return to growth this quarter with both overall and organic sales up low single digits. Once again, we saw strong orders growth across our Paragon business and our automation businesses in the quarter. So excited about that.

And we continue to expect mid single digit organic growth for the sub segment. So overall, that’s a picture around the horn. Your second question was related to the trade environment and what’s going on there. Our businesses responded quickly and developed tariff response plans to mitigate the impacts. And as a reminder, we have a comprehensive plan to go after.

We have select pricing increases. We have supply chain adjustments. We have some manufacturing localizations. We have some targeted cost reductions and we saw direct benefits from these actions in the second quarter, including pricing, supply chain changes and some of our localization efforts. And we expect to see these benefits throughout the year.

And it’s a testament to our operating capability. We really are managing through it well. And I think in our last call, we noted we’re confident in our ability to offset these direct costs. And now I just add very confident to it. And I think we’re in good shape regarding tariffs.

And then the last question was how are we doing? How did the quarter play out? How did that all play out? And the cadences, I think you asked about, Dean. And the cadence for June was the strongest month for orders for the year.

So normally, we have a we step through the quarters with the final month of the quarter being highest. So that was pretty typical. But June was strong. It was the strongest of the quarter, strongest year to date. And July was it’s not finished yet, but month to date is looking very good.

So pretty typical quarter with June being the strongest of the quarter, both sales in order and no slowdown.

Deane Dray, Analyst, RBC: Great. Dave, that was a comprehensive answer to a multi part question, so I’ll leave it there. Thank you.

Dave Zapico, Chairman and Chief Executive Officer, AMETEK: Thank you. Thank you, Dean.

Towanda, Conference Operator: Please stand by for our next question. Our next question comes from the line of Jeffrey Sprague with Vertical Research. Your line is open.

Jeffrey Sprague, Analyst, Vertical Research: Hey, thanks. Good morning, everyone.

Dave Zapico, Chairman and Chief Executive Officer, AMETEK: Morning, Jeff.

Jeffrey Sprague, Analyst, Vertical Research: Dave, congrats on getting morning. Congrats on getting Ferro done. I wonder if we could just talk about that a little bit more in terms of the integration plan. I believe you see a lot more synergies there than the typical AMETEK playbook given their margins coming in and the fit with Creoform and other things. So maybe you could just elaborate on what you see on synergies and then really tying it to the 2025 guide also, it doesn’t look like really you’re expecting much of a benefit in 2025.

I know you’ll be betting it down, but if you’re excluding restructuring and everything, I would think maybe we do get some contribution in ’twenty five.

Dave Zapico, Chairman and Chief Executive Officer, AMETEK: Yeah, that’s a great question, Jeff. I’ll start with, we think it’ll be a couple of penny benefit in 2025. So we have a partial quarter in Q3 and then Q4. So we think we’ll pick up a couple pennies there. When you take a step back and look at the acquisition, as I mentioned in my prepared remarks, it’s an excellent fit with what we do.

And we think we can add meaningful value to Ferro. They were public companies, so we have the elimination of public company costs and the integration into AMETEK’s global infrastructure. And we have a little higher than typical synergies. We have mid teens cost synergy. So if you think about the Faroe, the last couple of quarters has been operating at about 15% EBITDA And we think that’ll be a 30% EBITDA in about three years.

So a significant potential to expand operating margins through integration into the AMETEK infrastructure and operating model. And we’re really pleased that we were able to add the highly differentiated adjacent products and technologies to AMETEK’s Ultra Precision Technologies division. The products nicely complement ours. We have a leading market share now, number one or number two, in many key verticals, measurement arms, laser scanners, laser trackers. We have now a new presence in fast growing digital reality scanning market.

We have an emerging SaaS solution enabling the digital reality capture workflow. And they have a good recurring revenue profile for service. About 60% of it’s hardware, 25% of it’s service and 15% of its software. The teams have come in and done a great job. We’re working very well together.

So we’re excited about it. When I look at this business, it reminds me a lot of the Zygote acquisition, very similar in Zygote and Ferro in name, but also, it went into our UPT division the same as Zygote. And if you look at Zygote, a it smaller public company. And they were always trying to swing for the fences, hit grand slams because they wanted to get noticed. And they took on some things that were outside of their core.

And we a very similar situation with Pharoah. And if I look at what we did with Zygote, the sales averaged 9% CAGR over the first ten years. EBITDA grew over five times. EBITDA margins increased two and a half times. And we reduced working capital by 50% over the first five years.

So I think we have that kind of potential here. There’s a lot of talent there. We need to give it some focus. The current management team did a good job, I’ll call it cleaning up the business in the last twelve or eighteen months and we’re extremely excited of what the future brings.

Jeffrey Sprague, Analyst, Vertical Research: So pretty good algorithm, if you can pull that off. Yeah, That’s I great. And think then maybe, yeah, absolutely. And then on Paragon, Dave, if you could. So it sounds, as you said, orders firming up.

Is that translated to the top line at Paragon yet? How do you see Paragon specifically performing here as we work through the back of the year?

Dave Zapico, Chairman and Chief Executive Officer, AMETEK: Yes, I mean, Paragon had another excellent quarter, Jeff. Orders growth was again robust. Sales were strong and we continue to drive outstanding margin expansion. The orders were the largest increase in AMETEK by far. We also have a situation where the Paragon EBITDA margins are now in line with AMETEK’s.

So they’re at 30 plus percent EBITDA margins and we see meaningful margin runway ahead. So outstanding work by the entire Paragon team. The destock is over and we are very, very excited about what we’re seeing. So, very pleased with what’s going on there. They’re in a good position with their customers and consumable surgical instruments, implantable components and attractive market segments.

We’re through the destock. We took some time to do some hard work cleaning up the business. It has excellent engineering capability. They have new programs wins and we’re really, really pleased with where we’re at now.

Jeffrey Sprague, Analyst, Vertical Research: Great. Thanks for that color. I’ll pass the baton to someone else. Good luck out there.

Dave Zapico, Chairman and Chief Executive Officer, AMETEK: Okay. Thank you, Jeff.

Towanda, Conference Operator: Please stand by for our next question. Our next question comes from the line of Jamie Cook with Truist. Your line is open.

Jamie Cook, Analyst, Truist: Hi. Good morning and nice quarter. Thank you, Jamie. I guess two questions. Thank you.

Two questions. First, Dave, as I look at your guide, I’m just trying to understand the puts and takes and I guess level of conservatism in the guide because you’re saying, Faro adds a couple of pennies. It sounds like tariffs should be more of a tailwind. So can you help us understand what you’re assuming now relative to the $100,000,000 in tariff costs that you talked about last quarter and then the $70,000,000 from China? And is there any change sort of in the core business?

I just want to understand the puts and takes of the guide today versus first And then my second question is, again, impressed with the EMG margins this quarter. Paragon, you’re now saying the margins are in line with AMETEK. Just the setup for EMG margins as we exit the year, I would assume that would be one of your highest margin improvement segment. The margins in that segment should improve the most. Just trying to understand if I’m thinking about that correctly.

Thank you.

Dave Zapico, Chairman and Chief Executive Officer, AMETEK: Yes. I’ll start with the margins. And I do think you’re thinking about it correctly. I mean there’s excellent performance in the quarter, up two ten basis points on a reported basis, two sixty on a core margin basis. So EMG really is had a good quarter in margins.

And in the back half of the year, I think it’s going to stay the same way. There’s a good margin expansion there. And both our EIG and EMG businesses, core margin expanded 90 basis points. The reported margins were up 20 basis but core was up 90 basis We had a fantastic quarter. We are excellent at driving the operations of the business.

There was excellent productivity, there was positive price cost and really strongly performing acquisitions. When I look at the OpEx, I mean, people are getting it done. We raised our OpEx, we’re going to working through the P and L to 155,000,000 That’s about 25,000,000 from where we started the year and up 5,000,000 from last quarter. So the OpEx side of this thing is working extremely well and we’re pleased with that. Going back to the guide, we beat our earnings, we boosted our guide for the year, and we have a big bolt on.

And we talked about a couple of cents from Faroe, that’s all built into the model. I think there’s a bit of conservatism in the Q3 guide as we get through all these changing dynamics. We feel very confident, but there’s a bit of conservatism in the near term guide. I think that in terms of China, you mentioned the $70,000,000 that we had flagged in the second quarter. We got a good portion of that.

Later in the quarter, it opened up. We didn’t get it all, but we got a good portion of that. And the $70,000,000 that we identified as a tariff impact that we would offset, we’re not going to constantly change with that changing environment. We’re not going to constantly update the exposure in real time. But we got it.

And we don’t have a problem this year. So the $100,000,000 that was a negative headwind is not a negative headwind. That’s the best way I can

Jamie Cook, Analyst, Truist: Thanks explain so much. Congrats on the next quarter.

Dave Zapico, Chairman and Chief Executive Officer, AMETEK: James.

Towanda, Conference Operator: Please stand by for our next question. Our next question comes from the line of Matt Summerville with D. A. Davidson. Your line is open.

Matt Summerville, Analyst, D.A. Davidson: A couple of questions. You talked in detail about Paragon, which was very helpful. Can you go through the same kind of analysis on specifically the automation side of the business where how that business is performing from a profitability standpoint, what you’re seeing from an inbound order point of view, where you are with the inventory sort of reductions you were seeing in the channel there? Has that been one of the more challenged businesses for you guys? And then I have a follow-up.

Thank you.

Dave Zapico, Chairman and Chief Executive Officer, AMETEK: Yes. The automation business, it’s in the same category as Paragon, the destock is over. And we’re seeing strong growth in orders. Paragon and the automation business drove the profitability increase in EMG. So there’s continued upside there.

But both Paragon and automation, the two MedTech, which Paragon is in automation that dealt with the destock is done. So we’re feeling good about that. It’s driving profit growth and that’s why the EMG margins are up two sixty basis points on a core basis. Okay? If you think about those

Matt Summerville, Analyst, D.A. Davidson: businesses specifically, what do you think the right go forward organic algorithm looks like for that portion of AMETEK? And then Dave, if you can just maybe comment a little more broadly what you’re seeing from a go forward actionability standpoint M and A wise post FARO, what you’re seeing in terms of deal size multiples, etcetera, that would be helpful. Thank you.

Dave Zapico, Chairman and Chief Executive Officer, AMETEK: Yeah, okay. Yeah, I think the EMG business is the automation and engineered part of EMG is inflecting up. So I think it’s going to lead us in our next phase of growth. I think we’re saying this year that we’ll be up mid single digits. So I think that’s positive from last year.

Obviously, if the order rates continue, there can be some upside there. In terms of the acquisition pipeline, This year we two deals done, deployed $1,000,000,000 and acquired $400,000,000 in revenue. And we’re excited about these acquisitions. They’re high quality businesses that expand our presence in attractive growth markets. We have a clear path to add value in both the businesses.

I talked about the recent acquisition of Ferro in detail. And to your question, our pipeline remains strong. We’re very actively looking at a number of high quality deals. As Dalip mentioned, we have $2,000,000,000 of existing cash and credit facilities. As always, we’re going to remain disciplined, we did some analysis and if we lever it up to 2.5 times, we got about 4,500,000,000.0 to $5,000,000,000 to spend.

And I think that we have the opportunity to differentiate our performance with the M and A element of our growth strategy combined with our balance sheet and combined with our strong cash flow. So excel at this and especially when markets are choppy and the combination of our operational excellence and M and A, I think we’re really focused on the pipeline and the pipeline is strong.

Matt Summerville, Analyst, D.A. Davidson: Great. Thanks, David.

Dave Zapico, Chairman and Chief Executive Officer, AMETEK: Yeah, thank you, Matt.

Towanda, Conference Operator: Please stand by for our next question. Our next question comes from the line of Chris Snyder with Morgan Stanley. Your line is open.

Chris Snyder, Analyst, Morgan Stanley: Thank you. I wanted to just kind of follow-up on some of the commentary on back half growth. It seems like with Faro and some of the prior M and A done that M and A could be about almost a mid single digit tailwind. And I would imagine there’s some FX tailwinds on top of that, kind of pushing collectively maybe into that mid to high single digit range in the back half. So I guess, is that right?

And then what do you guys assume for organic growth into the back half of the year? Thank you.

Dave Zapico, Chairman and Chief Executive Officer, AMETEK: Yeah. The one thing, Chris, I talk about FX a little bit. And, we’re going to see, for the year a top line FX tailwind of about one percentage point. And we saw that same one percentage point in Q2. So on the top line, there’s a little bit of a tailwind.

But on the bottom line, we’re largely naturally hedged. I mean, when the currencies go either way, you never hear us talking about it, you never hear us as a positive from it, you never hear a negative from it. And we’ve run our businesses differently than most and we have a natural hedge at the bottom line given the general balance of revenues and costs across key currencies. So generally, we don’t see meaningful impact to our profit results from FX movements. Now the FX the dollar has weakened and we do export quite a bit of high technology products from The US.

So I think the lower dollar, because we build our higher technology products, many of them in The US, is going to make us more competitive. So we understand our competitive positions. We’re very well positioned to deal with currency fluctuations and it’s a positive situation. I think organic growth for the year is still plus LSD. So we’re assuming positive LSD.

We’re assuming both groups are positive. And then we’ve got the acquisitions that get us to MSD for the year. So that’s where we are versus our prior guide. And, we think that it’s reflective of the situation that we’re operating in.

Chris Snyder, Analyst, Morgan Stanley: Thank you. I appreciate that. And then maybe just following up on Faroe. I think the margin opportunity is pretty clear when we see the gross margin that they were running at. But I think if we look at the business, there really hasn’t been much, if any, growth over the medium to long term.

You just maybe talk about how Creoform has grown, just to provide some color on the industry growth there? Thank you.

Dave Zapico, Chairman and Chief Executive Officer, AMETEK: Yes. Creoform has grown like a weed. When we acquired it, it was about a $40,000,000 business and it’s grown at double digits since then. And the team has done an excellent job. So it’s a much, much bigger business than when we acquired it.

I made the analogy to our Zygote acquisition because I think it’s really key. There’s a lot of capability at Ferro and a lot of talent and they were just unfocused. They went down a path and spent a lot of money and didn’t get a return for it. And we’re going to do the same thing we did with Zygarde. We’ll get the team together.

We’re going to focus on their core advantages. We’re not going to swing for the fences. We’re going look for incremental wins and that business is going to grow nicely for us. So we have a bottom line, chance to double the EBITDA margins in three years and at the same time with the technology and capability in that business, we’re going to grow the top line too. And, we have a good analogy with the Zygote acquisition.

Chris Snyder, Analyst, Morgan Stanley: Thank you, Dave. Appreciate that.

Towanda, Conference Operator: Our Our next question comes from the line of Andrew Obin with Bank of America. Just

Andrew Obin, Analyst, Bank of America: two questions for me, I’ll stick them into one. In terms of China, was there any pull forward of demand on metrology equipment given that there is still some uncertainty about punitive tariffs in the second half? And just overall on your organic growth as and I apologize, I might have missed some stuff. But as you went through the segments and where you were and where you’re going, is it fair to say that generally you think short cycle industrial has bottomed and you’ve raised your organic growth expectations on the margins going forward. Just want to button up those two issues.

Thank you.

Dave Zapico, Chairman and Chief Executive Officer, AMETEK: Yeah, in terms of China, yeah, the country was down low single digits for us for the quarter. So it was down a bit. I don’t think there’s really a pull ahead there. It’s a situation where we’re doing some projects and the projects require funding and the tariffs have just caused a lot of delays in getting the proper funding. So there’s still strong demand for our projects.

And we got a good portion of the stuff out in the second quarter that we flagged last time. So that was a positive. And there’s still a bit of uncertainty in the market. But we’re well positioned and our customers are working with us. But I wouldn’t characterize it as a pull ahead in metrology.

No, I don’t think we saw that. Your other question was related to

Andrew Obin, Analyst, Bank of America: Has the cycle bottomed? Are you guys feeling better about organic growth?

Dave Zapico, Chairman and Chief Executive Officer, AMETEK: Yeah, think, yeah. I characterize the med tech market and the automation market as short cycle. They’re more mid cycle. But we are seeing a specific destock end, and we’re feeling really good about the orders there. So that’s true.

So yes, I think that where we’re at is our strength in our A and D business, broad based, improved outlook. Our power business is starting to accelerate with grid spending, improved outlook. I think we talked about the automation and engineering solutions, Paragon, strong growth, highest in the company. Also our automation business now inflecting upward. And our process business, process and analytical is definitely not incrementally weakening, but the markets are still sluggish.

And we have a pipeline of potential orders are solid. We’re beginning to see the quotations there, related to reshoring, related to new opportunities, related to existing opportunities. But that’s where the project business is dealing with a bit of that uncertainty. So we have to work our way through that. But in the other three market segments, it feels like we’re in a positive situation.

Andrew Obin, Analyst, Bank of America: I’ll take it. Thank you so much.

Dave Zapico, Chairman and Chief Executive Officer, AMETEK: Okay. Thank you, Andrew.

Towanda, Conference Operator: Please stand by for our next question. Our next question comes from the line of Brett Linzey with Mizuho. Your line is open.

Chris Snyder, Analyst, Morgan Stanley: Hey, good morning all.

Dave Zapico, Chairman and Chief Executive Officer, AMETEK: Good morning, Brett.

Jeffrey Sprague, Analyst, Vertical Research: Hey, wanted to come back just to the slower decision making. I guess, are customers giving you any sense on the timing of that quotation activity and what the budgeting timeline might look like there? And then anything on that front to glean through July in terms of those discussions?

Dave Zapico, Chairman and Chief Executive Officer, AMETEK: Yeah, the timelines, yeah, it’s difficult. I mean, there are definitely some, delayed shipments. I think the certainty around the trade back and forth is important to get it resolved. We’re seeing the high number of trade deals get negotiated, get concluded. That takes the uncertainty off the table with everybody and we can go forward.

So I don’t think it’s the level of the tariffs, it’s the uncertainty of the tariffs. And I think as we rapidly gotten some trade deals done, I think that uncertainty is reducing. And as those play through, and we understand the impacts of them, I think the uncertainty is going to reduce. I mean, in The US, we have the overall positive outcomes as Dallup mentioned from the tax bill. So we have the it helped clarify those go forward tax rules, but the immediate expensing of R and D, capital equipment for capital equipment purchases, the spur customer capital investments, and at the same time, we have the tariffs where we have people looking to reach short to The U.

S. And we’re in a very good position to help them do that. So that’s a positive and we have the but the tariffs have to get settled. As we move through this and more of those get settled, think the cloud is going be removed from some of those projects.

Jeffrey Sprague, Analyst, Vertical Research: Thanks for that. And then just a follow-up on the $70,000,000 of the potential at risk revenue that you had flagged on the last quarter call. I know that’s direct U. S. To China instrumentation.

Maybe just a finer point on how much of that did ship in 2Q? And are you assuming that the remaining gets delivered as part of the framework, or is there still some contingency there?

Dave Zapico, Chairman and Chief Executive Officer, AMETEK: I I’d say that a good majority of it shipped, and there’s still some of it that’s unresolved, and that’ll get resolved in Q3 and Q4. Okay, great. Best of luck. Thank you.

Towanda, Conference Operator: Please stand by for our next question. Our next question comes from the line of Christopher Glynn with Oppenheimer and Company. Your line is open.

Kevin Coleman, Vice President of Investor Relations and Treasurer, AMETEK0: Thanks. Good morning.

Dave Zapico, Chairman and Chief Executive Officer, AMETEK: Hey, Chris.

Kevin Coleman, Vice President of Investor Relations and Treasurer, AMETEK0: Hey, Dave, A question about the pipeline with a little bit more specificity on the aero defense market. It’s been a while since you did Abaco four years ago. I’m curious about the pipeline there, maybe all the noise around the industry supply chain being kinked up is revealing some properties there that might be opportunistic in that space. How are you thinking about and also how are you thinking about A and D more fundamentally in the context of all your businesses for long term M and A?

Dave Zapico, Chairman and Chief Executive Officer, AMETEK: Yeah, I think the A and D market is certainly a market we would like to deploy more capital in. So we’re actively looking at the market. We’re actively looking at some deals. From my viewpoint, it’s been a great profit generator from AMETEK. We have unique differentiated positions.

So really good management team, they continue to perform and I love to deploy capital in that area.

Kevin Coleman, Vice President of Investor Relations and Treasurer, AMETEK0: Okay, great. And then for EMG, your automation is starting to accelerate here and sounds like some incremental inflection. So with this cyclical momentum there in medical, would you expect more level loaded first half, second half sales versus usually it’s slightly tilted towards the first half on a seasonal basis?

Dave Zapico, Chairman and Chief Executive Officer, AMETEK: Yeah, I’d say with the increase in orders, we’re going to have a solid second half. So that might be a little bit of a different tilt than a typical year. You saw the orders coming in the first half of the year and you might have the shipments coming out three to six months later. So it might be a little bit different. Makes sense.

Matt Summerville, Analyst, D.A. Davidson: Thank you.

Dave Zapico, Chairman and Chief Executive Officer, AMETEK: Okay. Thanks, Chris.

Towanda, Conference Operator: Our next question comes from the line of Steve Barger with KeyBanc Capital Markets. Your line is open.

Kevin Coleman, Vice President of Investor Relations and Treasurer, AMETEK1: Hi, good morning. This is Jacob Moore on for Steve. Thanks for taking the questions.

Dave Zapico, Chairman and Chief Executive Officer, AMETEK: Good morning.

Kevin Coleman, Vice President of Investor Relations and Treasurer, AMETEK1: Just a two parter from us as well, kind of staying on orders and backlog. They look pretty solid this quarter. Can you just help us understand the breakdown of orders and backlog between the segments? Are there any end markets you would call out showing notable strength or weakness in orders? And then the quick second is related to the tariff situation.

Beyond the China metrology, do you think there’s any level of pull forward more broadly up to this point? Any perspective you have there would be helpful.

Dave Zapico, Chairman and Chief Executive Officer, AMETEK: Yeah, in terms of the pull forward, we’re typically manufacturing customized systems that are higher dollar value. So I’m sure there was a little bit of pull forward, but it’s not of a meaningful, quantifiable number in our respect. So we are probably less affected by pull forwards than most companies because of the nature of our product portfolio. In terms of the orders, overall orders were up six percent in the quarter. The EMG business was up double digits.

EIG was up single digits. In terms of book to bill was one. EMG was a little above one, and EIG was a little below one. And as I mentioned, the cadence of the orders, June was the the strongest month of the quarter and also the strongest month of the year.

Kevin Coleman, Vice President of Investor Relations and Treasurer, AMETEK1: Got it. Thank you very much.

Dave Zapico, Chairman and Chief Executive Officer, AMETEK: Thank you.

Towanda, Conference Operator: Our next question comes from the line of Nigel Coe with Wolfe Research. Your line is open.

Kevin Coleman, Vice President of Investor Relations and Treasurer, AMETEK2: Thanks. Good morning, everyone.

Dave Zapico, Chairman and Chief Executive Officer, AMETEK: A

Kevin Coleman, Vice President of Investor Relations and Treasurer, AMETEK2: lot of details already. Dave, thanks for the details by segment. So the EIG book to bill, I’m just curious, the aerospace and defense businesses within EIG, would they be still above one within that overall?

Dave Zapico, Chairman and Chief Executive Officer, AMETEK: Yeah. They they be above one, but that’s a backlog business. Okay? So a lot of those orders are, you booked, you know, three, six, nine months, even a year in advance, but, yes, they were above one.

Kevin Coleman, Vice President of Investor Relations and Treasurer, AMETEK2: Yep. Okay. And then you called out, obviously, the process and analytical SBU still, I think you said sluggish. There’s been a lot of concern around academic and government funding. So just curious what you’re seeing in your Gatan and some of the other businesses that might be affected by those pressures.

Dave Zapico, Chairman and Chief Executive Officer, AMETEK: Yeah, that’s a good question. If you just look at our verticals, the med tech was positive, A and D, as I talked about, was positive, automation was positive, and food was positive. And the two negatives will be the semiconductor market and the research academia market. And it will be in The U. S.

And globally. So that would be how I would look at it from the verticals. And obviously, our process business plays in a lot of those. But semi and research were headwinds in the quarter.

Kevin Coleman, Vice President of Investor Relations and Treasurer, AMETEK2: Maybe just could you size that research exposure for AMETEK? And these pressures are temporary? Do you think it could be with us for some time?

Dave Zapico, Chairman and Chief Executive Officer, AMETEK: Yeah, research market is about 10% of AMETEK. That’s a good estimate for size. In The US, is a redefining a little bit of the spend and the, without getting into a lot of detail, if the spend associated with the projects have been reduced, but they still want to go forward with the projects. There are some delays and those delays are happening. I think that those in the research market, there’s some parts of the world where the research market’s very strong.

You know, about 25% to 30% of our research market’s in The US, the balance of it internationally. So we had a little issue in China there that we talked about. And the smaller part of it is in The US where there is some delay in research academia funding. And we’re seeing that as a bit of a headwind to our process business. I think that’ll

Kevin Coleman, Vice President of Investor Relations and Treasurer, AMETEK2: be around

Dave Zapico, Chairman and Chief Executive Officer, AMETEK: for definitely quarter three as we get into the fourth quarter. I’m not sure.

Kevin Coleman, Vice President of Investor Relations and Treasurer, AMETEK2: Makes sense. Thanks, Dave.

Dave Zapico, Chairman and Chief Executive Officer, AMETEK: Our next

Towanda, Conference Operator: question comes from the line of Scott Graham with Seaport Research Partners. Your line is open.

Kevin Coleman, Vice President of Investor Relations and Treasurer, AMETEK3: Hey, good morning. I have I’m sorry, I joined the call late. Gabe, did you provide what the pricing was in the quarter? And then I’ll ask maybe what your thinking is for the second half? And then with that, with tariffs coming down, how did you approach that with customers?

Because I’m sure prices announced were a certain level and then tariffs came down, you might have had to adjust those. Could you just kind of walk us through all that?

Dave Zapico, Chairman and Chief Executive Officer, AMETEK: Yes. A lot of that’s into the detailed discussions in our business units. I’ll say that in the quarter, we had positive price cost spread. We didn’t guide to price exactly, but we had a positive pricecost spread. I think we’ll have that for the year.

The price increases, I would define them as selective. We’re trying to work with our customers. At the same time, I’m confident that the impacts of tariff and inflation will be offset by price And it speaks to the results are related to the highly differentiated nature of the AMETEK product portfolio and our leadership position and niche markets around the globe. So that’s how I characterize it.

Kevin Coleman, Vice President of Investor Relations and Treasurer, AMETEK3: Okay. I appreciate that. Thank you. And then just maybe flipping to process, which looked like it was softer than perhaps you were thinking internally. That sort of division, whatever we want to call that, has a lot of different end markets.

Could you kind of tell us what the puts and takes were there?

Dave Zapico, Chairman and Chief Executive Officer, AMETEK: Yeah, I was going through that a little bit before. So there would be positives on the med tech space, like our Rollins businesses there. They had a really good quarter. Positive in the food business. We have a MoCon business.

Have about 3% or 4% of our businesses who that was very positive. The oil and gas market, that was kind of just

Jeffrey Sprague, Analyst, Vertical Research: nothing

Dave Zapico, Chairman and Chief Executive Officer, AMETEK: really positive, nothing really negative. And in the semiconductor and the research markets, those were headwinds. That’s how I’d characterize it.

Kevin Coleman, Vice President of Investor Relations and Treasurer, AMETEK: I appreciate that. Thank you.

Dave Zapico, Chairman and Chief Executive Officer, AMETEK: Thank you. Thank you, Scott.

Towanda, Conference Operator: Thank you. Ladies and gentlemen, I am showing no further questions in the queue. I would now like to turn the call back to Kevin for closing remarks.

Kevin Coleman, Vice President of Investor Relations and Treasurer, AMETEK: Thank you, Towanda, and thanks, everyone, for joining our call today. And as a reminder, a replay of today’s webcast can be accessed in the Investors section of ametek.com. Have a great day.

Towanda, Conference Operator: Ladies and gentlemen, that concludes today’s conference call. Thank you for your participation. You may now disconnect.

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