Insights

Why COVID-19 means this tech player is one to watch

The name may not ring a bell like other big tech and social media companies that hog the limelight.

However, you may be surprised to discover that this company’s products are nearly as ubiquitous as mobile phones. While you may not have used its products directly, some of its technologies may have been used in one of your medical consultations or in delivering a recent meal.

The company is none other than IDEX Corporation (NYSE: IEX). And yes, I hear you say “IDEX who?”

Who is IDEX and what does it do?

Listed on the New York Stock Exchange (NYSE) and part of the S&P 500 index, IDEX Corporation is a developer, designer and manufacturer of specialised engineering products. The company belongs to the manufacturing sector with focus on various niche areas.

So, although you may not directly use their products the way you use your smart phone or computer, it is highly likely that IDEX’s technology has been used in the manufacture of most of the electronic gadgets we now enjoy.

Aside from the semiconductor and electronics industry, IDEX services a wide range of other sectors including aerospace, food, military, agriculture and automative.

Founded in 1988 when three small, entrepreneurial manufacturing companies banded together in Illinois (Chicago, USA) IDEX’s first year sales were just US$209 million.

Today, the company operates over 40 diverse businesses around the world, with total company sales of more than US$2 billion.

IDEX has more than 7000 employees and manufacturing operations in more than 20 countries across the globe.

Technologies behind IDEX

Fluid and metering technologies

This involves the use of precision engineered pumps, meters and systems that move, measure and manage high value liquids, gases, and solids. These products and technologies are in high demand in the process industries.

Think about the production of alternative fuels, chemical processing, and water treatment. IDEX says these highly specialised technologies are also widely used in areas where highly-precise sanitary applications are required like in the pharmaceutical and food and beverage industries.

This segment contributed 39% of sales and 40% of operating income for IDEX’s second quarter performance.

Health and science technologies

You may not have noticed it, but it is highly likely that your general practitioner (GP) or your dentist would have used one of IDEX’s instruments or technologies during your last consultation. IDEX’s products are heavily used in the fields of pharmaceuticals, life sciences, medical devices and implants (manufacturing) and even clinical diagnostics.

IDEX products and technologies are no doubt playing an important role in the global search for a COVID-19 vaccine.

This business segment accounted for 38% of sales and 37% of operating income for the second quarter.

Fire and safety/diversified products

This is another niche market for IDEX that involves the provision of equipment and technology for firefighting – fire suppression and control and rescue. This business segment also provides search and rescue equipment for emergencies like bushfires, car accidents and under-water rescues.

This segment represented 23% of sales and 23% of operating income during the last reporting quarter.

Financial performance

Like many companies and industries impacted by the COVID-19 pandemic, IDEX reported a 17% drop in sales for the second quarter in its last financial report in July 2020.

But Andrew Silvernail, chairman and chief executive officer of IDEX said: “Our business continues to demonstrate durability given the mission critical nature of our products.”

Share price performance

A strong recovery from the pullback low of March 2020 has seen the stock erase all of the losses from earlier in the year. Gains during August saw the shares extend the multi-decade upward trend to reach new all-time highs above US$180 with recent strength pointing to moves beyond US$185.

Initial support sits in the US$176 to US$174 region with important support below around US$160-US$155.

Analysts’ view on IDEX

According to a recent survey of analysts covering IDEX, the company received a “buy” rating from 15 research firms versus one that rated it a “sell”.

Some analysts have also revised their price target on shares of IDEX from US$172.00 to US$178.00 – which has already been surpassed. Another research house has a price target from US$172.00 to US$195.00, with the latter being the next level to watch.

Conclusion

Given the niche segments in which IDEX operates – medical, pharmaceutical, electronics, agriculture, food and life sciences – all of which are critical as the whole world seeks for ways to recover and restart the global economy from the devastating effects of COVID-19, we believe IDEX is a buy.

The recent share price movement and long-term uptrend reflects the demand for the company’s products and technologies.


Alex Douglas is the managing director of Monex Securities Australia (AFSL 363 972), and is responsible for the overall growth of Monex in this region. He has held senior executive positions with numerous financial services companies both in Australia and Asia over the past three decades. Early roles in the industry included being a foreign exchange voice broker, a trader on the floor of the Sydney Futures Exchange and a senior analyst with Standard & Poor’s in Singapore.  Alex is a Certified Financial Technician (CFTe) and former board member of the International Federation of Technical Analysts (IFTA) as well as a sought-after author, speaker and market commentator.

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