Vontier (NYSE:VNT) Posts Better-Than-Expected Sales In Q4 But Full-Year Sales Guidance Misses Expectations

Electronic equipment provider Vontier (NYSE:VNT) reported revenue ahead of Wall Street’s expectations in Q4 CY2024, but sales fell by 1.5% year on year to $776.8 million. On the other hand, next quarter’s revenue guidance of $722.5 million was less impressive, coming in 0.9% below analysts’ estimates. Its non-GAAP profit of $0.80 per share was 1.7% above analysts’ consensus estimates.

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Company Overview

A spin-off of a spin-off, Vontier (NYSE:VNT) provides electronic products and systems to the transportation, automotive, and manufacturing sectors.

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Sales Growth

Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can have short-term success, but a top-tier one grows for years. Regrettably, Vontier’s sales grew at a weak 1.5% compounded annual growth rate over the last five years. This fell short of our benchmarks and is a rough starting point for our analysis.

We at StockStory place the most emphasis on long-term growth, but within industrials, a half-decade historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. Vontier’s history shows it grew in the past but relinquished its gains over the last two years, as its revenue fell by 3.3% annually.

We can dig further into 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, Vontier’s organic revenue was flat. Because this number is better than its normal revenue growth, we can see that some mixture of divestitures and foreign exchange rates dampened its headline results.

This quarter, Vontier’s revenue fell by 1.5% year on year to $776.8 million but beat Wall Street’s estimates by 1.5%. Company management is currently guiding for a 4.4% year-on-year decline in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to grow 2.8% over the next 12 months. Although this projection implies its newer products and services will fuel better top-line performance, it is still below the sector average.

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Operating Margin

Vontier has been a well-oiled machine over the last five years. It demonstrated elite profitability for an industrials business, boasting an average operating margin of 18.1%. This result isn’t surprising as its high gross margin gives it a favorable starting point.

Analyzing the trend in its profitability, Vontier’s operating margin might have seen some fluctuations but has generally stayed the same over the last five years , highlighting the long-term consistency of its business.

In Q4, Vontier generated an operating profit margin of 19.2%, in line with the same quarter last year. This indicates the company’s cost structure has recently been stable.

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.

Vontier’s EPS grew at a weak 3.9% compounded annual growth rate over the last five years. This performance was better than its flat revenue but doesn’t tell us much about its business quality because its operating margin didn’t expand.

Diving into the nuances of Vontier’s earnings can give us a better understanding of its performance. A five-year view shows that Vontier has repurchased its stock, shrinking its share count by 10.3%. This tells us its EPS outperformed its revenue not because of increased operational efficiency but financial engineering, as buybacks boost per share earnings.

Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.

For Vontier, its two-year annual EPS declines of 3.1% show it’s continued to underperform. These results were bad no matter how you slice the data.

In Q4, Vontier reported EPS at $0.80, in line with the same quarter last year. This print beat analysts’ estimates by 1.7%. Over the next 12 months, Wall Street expects Vontier’s full-year EPS of $2.90 to grow 8.2%.

Key Takeaways from Vontier’s Q4 Results

It was good to see Vontier narrowly top analysts’ organic revenue expectations this quarter. We were also happy its revenue narrowly outperformed Wall Street’s estimates. On the other hand, its full-year EPS guidance missed and its full-year revenue guidance fell short of Wall Street’s estimates. Overall, this was a softer quarter. The stock remained flat at $37.35 immediately following the results.

So do we think Vontier is an attractive buy at the current price? The latest quarter does matter, but not nearly as much as longer-term fundamentals and valuation, when deciding if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free.