01-08-2025
Mettler-Toledo (NYSE:MTD) Surprises With Q2 Sales
Precision measurement company Mettler-Toledo (NYSE:MTD) reported revenue ahead of Wall Street's expectations in Q2 CY2025, with sales up 3.9% year on year to $983.2 million. The company expects next quarter's revenue to be around $987.9 million, close to analysts' estimates. Its non-GAAP profit of $10.09 per share was 5.1% above analysts' consensus estimates.
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Mettler-Toledo (MTD) Q2 CY2025 Highlights:
Revenue: $983.2 million vs analyst estimates of $955.4 million (3.9% year-on-year growth, 2.9% beat)
Adjusted EPS: $10.09 vs analyst estimates of $9.60 (5.1% beat)
Adjusted EBITDA: $271.6 million vs analyst estimates of $285 million (27.6% margin, 4.7% miss)
Revenue Guidance for Q3 CY2025 is $987.9 million at the midpoint, roughly in line with what analysts were expecting
Management raised its full-year Adjusted EPS guidance to $42.35 at the midpoint, a 1.7% increase
Operating Margin: 25.3%, down from 28.1% in the same quarter last year
Free Cash Flow Margin: 21.6%, down from 24.7% in the same quarter last year
Organic Revenue rose 2% year on year (-1.9% in the same quarter last year)
Market Capitalization: $25.64 billion
Patrick Kaltenbach, President and Chief Executive Officer, stated, 'We are pleased with our second quarter results and experienced growth throughout most of our business despite challenging market conditions. Our team performed extremely well, and we continue to benefit from our innovative product portfolio and strategic programs, which resulted in solid EPS growth in the quarter.'
Company Overview
With roots dating back to the precision balance innovations of Swiss engineer Erhard Mettler, Mettler-Toledo (NYSE:MTD) manufactures precision weighing instruments, analytical equipment, and product inspection systems used in laboratories, industrial settings, and food retail.
Revenue Growth
A company's long-term performance is an indicator of its overall quality. Any business can have short-term success, but a top-tier one grows for years. Over the last five years, Mettler-Toledo grew its sales at a mediocre 5.6% compounded annual growth rate. This was below our standard for the healthcare sector and is a rough starting point for our analysis.
Long-term growth is the most important, but within healthcare, a half-decade historical view may miss new innovations or demand cycles. Mettler-Toledo's performance shows it grew in the past but relinquished its gains over the last two years, as its revenue fell by 1.1% annually.
We can better understand the company's sales dynamics by analyzing its organic revenue, which strips out one-time events like acquisitions and currency fluctuations that don't accurately reflect its fundamentals. Over the last two years, Mettler-Toledo's organic revenue was flat. Because this number aligns with its two-year revenue growth, we can see the company's core operations (not acquisitions and divestitures) drove most of its results.
This quarter, Mettler-Toledo reported modest year-on-year revenue growth of 3.9% but beat Wall Street's estimates by 2.9%. Company management is currently guiding for a 3.5% year-on-year increase in sales next quarter.
Looking further ahead, sell-side analysts expect revenue to grow 3.4% over the next 12 months. Although this projection indicates its newer products and services will spur better top-line performance, it is still below the sector average.
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Operating Margin
Mettler-Toledo has been an efficient company over the last five years. It was one of the more profitable businesses in the healthcare sector, boasting an average operating margin of 28%.
Looking at the trend in its profitability, Mettler-Toledo's operating margin rose by 1.2 percentage points over the last five years, as its sales growth gave it operating leverage. Zooming into its more recent performance, however, we can see the company's margin has decreased by 1.7 percentage points on a two-year basis. If Mettler-Toledo wants to pass our bar, it must prove it can expand its profitability consistently.
In Q2, Mettler-Toledo generated an operating margin profit margin of 25.3%, down 2.8 percentage points year on year. This contraction shows it was less efficient because its expenses grew faster than its revenue.
Earnings Per Share
We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company's growth is profitable.
Mettler-Toledo's EPS grew at a spectacular 12.3% compounded annual growth rate over the last five years, higher than its 5.6% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.
We can take a deeper look into Mettler-Toledo's earnings quality to better understand the drivers of its performance. As we mentioned earlier, Mettler-Toledo's operating margin declined this quarter but expanded by 1.2 percentage points over the last five years. Its share count also shrank by 14.4%, and these factors together are positive signs for shareholders because improving profitability and share buybacks turbocharge EPS growth relative to revenue growth.
In Q2, Mettler-Toledo reported adjusted EPS at $10.09, up from $9.65 in the same quarter last year. This print beat analysts' estimates by 5.1%. Over the next 12 months, Wall Street expects Mettler-Toledo's full-year EPS of $40.90 to grow 7.6%.
Key Takeaways from Mettler-Toledo's Q2 Results
We enjoyed seeing Mettler-Toledo beat analysts' revenue expectations this quarter. We were also happy its organic revenue narrowly outperformed Wall Street's estimates. This led to an EPS beat and a raising of full-year EPS guidance, which is always a good sign. Overall, we think this was a solid quarter with some key areas of upside. The stock remained flat at $1,234 immediately after reporting.
Big picture, is Mettler-Toledo a buy here and now? We think that the latest quarter is just one piece of the longer-term business quality puzzle. Quality, when combined with valuation, can help determine if the stock is a buy. We cover that in our actionable full research report which you can read here, it's free.
