Skip to Content
Morningstar

Mettler-Toledo Earnings: Underlying Growth Drivers Intact Despite Weakening Near-Term Demand

""
Securities In This Article
Mettler-Toledo International Inc
(MTD)

Second-quarter results for narrow-moat Mettler-Toledo MTD landed roughly as expected, but slowing order volume from biopharmaceutical clients in China caused management to reduce its 2023 guidance somewhat. While we have made minor reductions to our full-year assumptions based on these trends, those adjustments were largely offset by cash flows generated since our last valuation update, and we are maintaining our $880 fair value estimate. The shares still look overvalued despite falling in after-hours trading.

Year over year, Mettler delivered flat revenue but increased adjusted EPS by 9% in the quarter, despite strong foreign-exchange headwinds. The lab business (which accounts for over 50% of total sales) declined year over year on weak results from biopharmaceutical clients in China. However, we still believe the firm’s decent recurring revenue (mainly services), pricing and productivity initiatives, and market share gains reflect its strong ability to execute. This reliable performance is reflected in the 200-basis-point higher rate of adjusted EPS growth relative to prior expectations for the second quarter. Slowing revenue growth in the second half of 2023 may threaten these profitability gains, however, as management said a sharp decline in demand in China and softness across other geographies and businesses has already leaked into the third quarter. As a result, we have decreased our revenue growth forecast to about 2% and have reduced our adjusted EPS growth expectation to about 4%. Our new estimates are roughly in line with management’s updated guidance for low-single-digit revenue growth and 2%-4% adjusted EPS growth in 2023.

Although the company faces uncertainty in the near term, we think Mettler’s and the life science industry’s long-term prospects are intact. Thus, our longer-term forecasts for the firm are relatively unchanged, at about 4% revenue growth and 11% adjusted EPS growth compounded annually through 2027.

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

More in Stocks

About the Author

Julie Utterback

Senior Equity Analyst
More from Author

Julie Utterback is a senior equity analyst for Morningstar Research Services LLC, a wholly owned subsidiary of Morningstar, Inc. Within the healthcare industry, she covers medical technology and service companies. She is also the chairperson of the equity research team’s capital allocation methodology.

Utterback joined Morningstar in 2005 as an equity analyst in the healthcare industry. At that time, she covered medical technology companies, including orthopedic device, medical equipment, and cardiac device firms. In 2010, she joined Morningstar's credit research team, initiating coverage of the entire healthcare industry and generally helping the organization expand and maintain its credit coverage across many industries. She held that senior credit analyst role until April 2019, when she returned to the equity team to cover medical technology and service companies.

Prior to joining Morningstar, Utterback was an equity analyst at State Farm Insurance for several years. She holds a bachelor's degree in finance from the University of Illinois Urbana-Champaign. She also holds the Chartered Financial Analyst® designation.

Sponsor Center