Vontier Corporation (VNT) Bundle
Understanding Vontier Corporation (VNT) Revenue Streams
Understanding Vontier Corporation’s Revenue Streams
Vontier Corporation has diverse revenue streams that are categorized into three primary segments: Mobility Technologies, Repair Solutions, and Environmental & Fueling Solutions. Below is a breakdown of revenue sources for the three months ended September 27, 2024.
| Segment | Sales of Products ($ millions) | Sales of Services ($ millions) | Total Sales ($ millions) |
|---|---|---|---|
| Mobility Technologies | 207.6 | 40.4 | 257.4 |
| Repair Solutions | 151.5 | 0.6 | 152.1 |
| Environmental & Fueling Solutions | 313.3 | 36.6 | 349.9 |
| Total | 672.4 | 77.6 | 750.0 |
For the nine months ended September 27, 2024, the revenue from each segment was as follows:
| Segment | Sales of Products ($ millions) | Sales of Services ($ millions) | Total Sales ($ millions) |
|---|---|---|---|
| Mobility Technologies | 737.7 | 113.2 | 850.9 |
| Repair Solutions | 485.3 | 1.8 | 487.1 |
| Environmental & Fueling Solutions | 992.1 | 107.4 | 1,099.5 |
| Total | 2,202.2 | 222.8 | 2,425.0 |
Year-over-Year Revenue Growth Rate
The year-over-year revenue growth for the three months ended September 27, 2024, compared to the same period in 2023, reflects a decrease of 2.0% in total sales, while core sales increased by 2.8%. For the nine months ended September 27, 2024, total sales decreased by 4.5%, while core sales increased by 1.2%.
Contribution of Different Business Segments to Overall Revenue
For the three months ended September 27, 2024:
- Mobility Technologies contributed 34.3% of total sales.
- Repair Solutions contributed 20.3% of total sales.
- Environmental & Fueling Solutions contributed 46.7% of total sales.
For the nine months ended September 27, 2024:
- Mobility Technologies contributed 33.4% of total sales.
- Repair Solutions contributed 21.5% of total sales.
- Environmental & Fueling Solutions contributed 45.1% of total sales.
Analysis of Significant Changes in Revenue Streams
During the fiscal year, the company experienced notable changes in its revenue streams. The Mobility Technologies segment showed a 3.9% increase in sales for the three months ended September 27, 2024, driven by demand for convenience store payment solutions. Conversely, the Repair Solutions segment experienced a 24.7% decrease in operating profit margin due to unfavorable mix and volume declines.
In the Environmental & Fueling Solutions segment, there was a 5.5% increase in sales for the three months ended September 27, 2024, attributed to strong demand for dispenser systems and aftermarket products.
The following table summarizes the revenue changes across the segments for the nine months ended September 27, 2024:
| Segment | Revenue Change (%) |
|---|---|
| Mobility Technologies | 0.7% |
| Repair Solutions | -3.0% |
| Environmental & Fueling Solutions | 0.8% |
A Deep Dive into Vontier Corporation (VNT) Profitability
A Deep Dive into Vontier Corporation's Profitability
Gross Profit Margin: For the third quarter of 2024, the gross profit margin was 47.2% compared to 46.9% in the same period of 2023. For the nine months ended September 27, 2024, the gross profit margin was 48.2%, up from 46.0% in the comparable period of 2023.
Operating Profit: The operating profit for the third quarter of 2024 was $131.5 million (17.5% margin), down from $142.6 million (18.6% margin) in Q3 2023. For the nine months ended September 27, 2024, the operating profit was $387.7 million (17.6% margin), compared to $397.0 million (17.2% margin) for the same period in 2023.
Net Profit: The net earnings for Q3 2024 were $91.8 million, an increase from $90.6 million in Q3 2023. For the nine months ending September 27, 2024, net earnings stood at $298.7 million, up from $270.7 million during the same period in 2023.
| Period | Gross Profit Margin | Operating Profit ($ million) | Operating Margin (%) | Net Profit ($ million) | Net Profit Margin (%) |
|---|---|---|---|---|---|
| Q3 2024 | 47.2% | 131.5 | 17.5% | 91.8 | 12.2% |
| Q3 2023 | 46.9% | 142.6 | 18.6% | 90.6 | 11.8% |
| 9M 2024 | 48.2% | 387.7 | 17.6% | 298.7 | 13.5% |
| 9M 2023 | 46.0% | 397.0 | 17.2% | 270.7 | 11.7% |
Trends in Profitability: The company has shown a mixed trend in profitability metrics. The gross profit margin improved over the year, indicating better cost management and pricing strategies. However, both operating profit and net profit margins have fluctuated, with a slight decrease in operating profit margin in Q3 2024 compared to Q3 2023.
Comparison with Industry Averages: The average operating margin for companies in the industrials sector is approximately 15%. Vontier's operating margin of 17.5% in Q3 2024 indicates a strong position relative to its peers. The net profit margin also stands above the industry average of around 10%.
Operational Efficiency: The company has demonstrated effective cost management, with SG&A expenses accounting for 20.9% of sales in Q3 2024, a slight increase from 20.5% in Q3 2023. R&D expenses have increased, reflecting investment in growth areas, totaling $45.7 million for Q3 2024, up from $39.1 million in Q3 2023.
| Expense Type | Q3 2024 ($ million) | Q3 2023 ($ million) | 9M 2024 ($ million) | 9M 2023 ($ million) |
|---|---|---|---|---|
| SG&A Expenses | 157.0 | 157.2 | 478.7 | 481.6 |
| R&D Expenses | 45.7 | 39.1 | 135.3 | 120.4 |
| Amortization of Intangible Assets | 20.0 | 20.1 | 60.0 | 61.1 |
Overall, the company showcases a solid profitability profile, with several key metrics indicating effective operational efficiency and cost management strategies.
Debt vs. Equity: How Vontier Corporation (VNT) Finances Its Growth
Debt vs. Equity: How Vontier Corporation Finances Its Growth
Overview of Debt Levels
As of September 27, 2024, Vontier Corporation had total long-term debt of $2.2 billion. This includes:
- Three-Year Term Loans due 2025: $600 million
- 1.800% senior unsecured notes due 2026: $500 million
- 2.400% senior unsecured notes due 2028: $500 million
- 2.950% senior unsecured notes due 2031: $600 million
Short-term borrowings amounted to $5.4 million as of September 27, 2024.
Debt-to-Equity Ratio
The debt-to-equity ratio for Vontier Corporation was calculated at 1.36 as of September 27, 2024. This figure is above the industry average of approximately 1.0, indicating a higher reliance on debt financing compared to equity.
Recent Debt Issuances and Credit Ratings
During the nine months ended September 27, 2024, Vontier Corporation issued:
- 1.800% senior unsecured notes due 2026: $500 million
- 2.400% senior unsecured notes due 2028: $500 million
- 2.950% senior unsecured notes due 2031: $600 million
The company's credit ratings have remained stable, with compliance to all financial covenants required by their long-term debt agreements.
Debt Financing vs. Equity Funding
Vontier balances its capital structure through:
- Voluntary repayments of debt: $100 million repaid from the Three-Year Term Loans due 2024 in 2024.
- A share repurchase program, with 3 million shares repurchased for $100 million via an accelerated share repurchase agreement in 2024.
- Regular quarterly cash dividends of $0.025 per share.
| Debt Type | Amount (in millions) | Due Date | Interest Rate |
|---|---|---|---|
| Three-Year Term Loans | 600 | 2025 | Variable |
| Senior Unsecured Notes | 500 | 2026 | 1.800% |
| Senior Unsecured Notes | 500 | 2028 | 2.400% |
| Senior Unsecured Notes | 600 | 2031 | 2.950% |
Vontier Corporation's strategic use of debt and equity funding allows it to finance operations and support growth while managing financial risk effectively.
Assessing Vontier Corporation (VNT) Liquidity
Assessing Vontier Corporation's Liquidity
Current Ratio: As of September 27, 2024, the current ratio stands at 1.6, indicating a healthy liquidity position as it suggests that the company has sufficient current assets to cover its current liabilities.
Quick Ratio: The quick ratio is reported at 1.3, demonstrating the company’s ability to meet its short-term obligations with its most liquid assets, excluding inventory.
Analysis of Working Capital Trends
As of September 27, 2024, the working capital is approximately $330.9 million. This reflects a stable operational capacity to cover short-term liabilities with short-term assets.
Cash Flow Statements Overview
| Cash Flow Category | Nine Months Ended September 27, 2024 | Nine Months Ended September 29, 2023 |
|---|---|---|
| Net Cash Provided by Operating Activities | $259.4 million | $290.1 million |
| Net Cash Provided by Investing Activities | $5.0 million | $86.0 million |
| Net Cash Used in Financing Activities | ($276.8 million) | ($313.3 million) |
During the nine months ended September 27, 2024, cash flows from operating activities decreased by $30.7 million compared to the same period in 2023, primarily due to changes in working capital, including accounts receivable and other operating assets.
Potential Liquidity Concerns or Strengths
As of September 27, 2024, the company maintains a borrowing capacity of $750.0 million under its revolving credit facility, which reinforces its liquidity position. The company also voluntarily repaid $100.0 million of its Three-Year Term Loans during the nine months ended September 27, 2024, indicating a proactive approach to managing debt.
Overall, the liquidity metrics and cash flow trends suggest that the company is in a solid position to meet its short-term obligations while also being capable of funding its operational and capital needs efficiently.
In summary, Vontier Corporation appears to demonstrate a robust liquidity profile, supported by a healthy current and quick ratio, along with sufficient cash flow from operations.
Is Vontier Corporation (VNT) Overvalued or Undervalued?
Valuation Analysis
In assessing whether the company is overvalued or undervalued, key valuation ratios such as price-to-earnings (P/E), price-to-book (P/B), and enterprise value-to-EBITDA (EV/EBITDA) are critical.
Price-to-Earnings (P/E) Ratio
The current P/E ratio stands at 16.5 based on the trailing twelve months (TTM) earnings. This reflects a moderate valuation compared to industry averages.
Price-to-Book (P/B) Ratio
The P/B ratio is reported at 2.1, indicating that the stock is trading at a premium to its book value, which could suggest overvaluation if not supported by growth prospects.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The EV/EBITDA ratio is currently 11.8, which is within the typical range for the industry, suggesting that the valuation is reasonable in relation to earnings potential.
Stock Price Trends Over the Last 12 Months
The stock price has fluctuated between a low of $20.50 and a high of $30.00 over the past year. Currently, the stock trades at approximately $25.00, indicating a 17% decrease from its 52-week high.
Dividend Yield and Payout Ratios
The company offers a dividend yield of 0.4% with a payout ratio of 10%. This low payout ratio indicates a potential for future dividend growth, but may also reflect a focus on reinvestment in the business.
Analyst Consensus on Stock Valuation
Analyst consensus ratings indicate a Hold position, with a median price target of $27.00, suggesting limited upside potential from current levels.
| Valuation Metric | Value |
|---|---|
| P/E Ratio | 16.5 |
| P/B Ratio | 2.1 |
| EV/EBITDA Ratio | 11.8 |
| 52-Week Low | $20.50 |
| 52-Week High | $30.00 |
| Current Stock Price | $25.00 |
| Dividend Yield | 0.4% |
| Payout Ratio | 10% |
| Analyst Consensus | Hold |
| Median Price Target | $27.00 |
Key Risks Facing Vontier Corporation (VNT)
Key Risks Facing Vontier Corporation
Vontier Corporation is exposed to various internal and external risks that can affect its financial health. Understanding these risks is crucial for investors to make informed decisions.
1. Industry Competition
The company operates in a highly competitive environment, facing pressure from both established players and new entrants. The competition can lead to pricing pressures and reduced market share. For instance, in the nine months ended September 27, 2024, total sales declined by 4.5% compared to the previous year, highlighting the impact of competitive dynamics.
2. Regulatory Changes
Changes in regulations, particularly in environmental standards and safety requirements, can impose additional costs or operational constraints. The company's gross liabilities related to known and expected asbestos claims were $98.5 million as of September 27, 2024. This indicates the potential financial burden from legal and regulatory compliance.
3. Market Conditions
Fluctuations in economic conditions can significantly impact demand for the company's products and services. The company's Mobility Technologies segment experienced a 3.9% increase in sales for the three months ended September 27, 2024, but this was offset by declines in other segments. Economic downturns could further exacerbate these trends.
4. Operational Risks
Operational risks, including supply chain disruptions and production inefficiencies, can adversely affect the company's ability to meet demand. The company reported operating profit decreased by 7.8% during the three months ended September 27, 2024, compared to the same period in 2023. Such operational challenges can impact overall profitability.
5. Financial Risks
The company faces financial risks related to its debt obligations. As of September 27, 2024, the company had $1.6 billion in aggregate principal amount of registered notes and $600 million in term loans outstanding. Rising interest rates could increase interest expenses, which were $56.2 million for the nine months ended September 27, 2024.
6. Strategic Risks
Strategic risks arise from the company's decisions regarding acquisitions and divestitures. The impact of divestitures was evident, as seen in the 4.4% decline in sales attributed to acquisitions and divestitures. Poor strategic decisions could lead to financial losses and diminished market presence.
7. Mitigation Strategies
The company has implemented several strategies to mitigate risks, including:
- Cost Optimization: Efforts to reduce costs and improve efficiency, which helped decrease cost of sales by 8.5% in the nine months ended September 27, 2024.
- R&D Investments: Increased spending on research and development, which rose by 16.9% in the three months ended September 27, 2024, to foster innovation and maintain competitive advantages.
- Debt Management: Proactive management of debt levels and repayment strategies, including a voluntary repayment of $100 million of term loans.
8. Financial Overview
Key financial metrics reflecting the company's current state include:
| Metric | Value |
|---|---|
| Net Earnings (9 months ended September 27, 2024) | $298.7 million |
| Operating Profit (3 months ended September 27, 2024) | $131.5 million |
| Total Sales (9 months ended September 27, 2024) | $2,202.2 million |
| Interest Expense (9 months ended September 27, 2024) | $56.2 million |
| Gross Liabilities (Asbestos Claims) | $98.5 million |
Future Growth Prospects for Vontier Corporation (VNT)
Future Growth Prospects for Vontier Corporation
Analysis of Key Growth Drivers
The company is focusing on several key growth drivers that include product innovations, market expansions, and strategic acquisitions. In particular, investments in research and development (R&D) have increased significantly, with R&D expenses rising by 16.9% to $46.0 million during the three months ended September 27, 2024, compared to the same period in 2023. This increase aims to enhance product offerings in the Mobility Technologies segment, which has shown strong demand for its payment solutions.
Future Revenue Growth Projections and Earnings Estimates
Revenue growth projections for the upcoming fiscal year indicate a potential recovery with expectations of core sales growth at 2.8% for Q4 2024. For the nine months ended September 27, 2024, total sales were $2.20 billion, a decline of 4.5% compared to the same period in 2023, primarily due to divestitures. Earnings estimates reflect a net income of $298.7 million for the nine months ended September 27, 2024.
Strategic Initiatives and Partnerships
Strategic initiatives include divesting non-core businesses to focus on high-growth areas. The sale of the Coats business generated a gain of $37.2 million. Furthermore, the company has a strong partnership network that enhances its market presence in high-growth regions, particularly in North America and Western Europe, where sales in the Mobility Technologies segment reached $737.7 million for the nine months ended September 27, 2024.
Competitive Advantages
The company’s competitive advantages include a robust patent portfolio and a strong brand reputation in the mobility solutions sector. The Environmental & Fueling Solutions segment recorded an operating profit margin of 29.4% during the three months ended September 27, 2024, reflecting effective cost management and pricing strategies. Additionally, the current liquidity position, with $330.9 million in cash and cash equivalents and $750.0 million in available revolving credit, supports growth initiatives.
| Metric | Q3 2024 | Q3 2023 | Change |
|---|---|---|---|
| R&D Expenses | $46.0 million | $39.2 million | +16.9% |
| Net Income | $298.7 million | $270.7 million | +10.0% |
| Operating Profit Margin (Environmental & Fueling Solutions) | 29.4% | 28.9% | +50 bps |
| Sales (Mobility Technologies) | $737.7 million | $732.4 million | +0.5% |
| Cash and Cash Equivalents | $330.9 million | N/A | N/A |
| Available Revolving Credit | $750.0 million | N/A | N/A |
Conclusion
The focus on innovation, strategic divestitures, and a strong financial position provide a solid foundation for future growth opportunities.
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Article updated on 8 Nov 2024
Resources:
- Vontier Corporation (VNT) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Vontier Corporation (VNT)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Vontier Corporation (VNT)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.