AMETEK (AME)

Electronic products manufacturer AMETEK (NYSE:AME) reported Q3 CY2025 results topping the market’s revenue expectations, with sales up 10.8% year on year to $1.89 billion. Its non-GAAP profit of $1.89 per share was 7.4% above analysts’ consensus estimates.

Company Overview

Started from its humble beginnings in motor repair, AMETEK (NYSE:AME) manufactures electronic devices used in industries like aerospace, power, and healthcare.

Industrial Internet of Things (IoT) companies are buoyed by the secular trend of a more connected world. They often specialize in nascent areas such as hardware and services for factory automation, fleet tracking, or smart home technologies. Those who play their cards right can generate recurring subscription revenues by providing cloud-based software services, boosting their margins. On the other hand, if the technologies these companies have invested in don’t pan out, they may have to make costly pivots.

Competitors of AMETEK include Danaher (NYSE:DHR), Agilent (NYSE:A), and Honeywell (NASDAQ:HON).

A company’s long-term sales performance is one signal of its overall quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Thankfully, AMETEK’s 9% annualized revenue growth over the last five years was solid. Its growth beat the average industrials company and shows its offerings resonate with customers.

Long-term growth is the most important, but within industrials, a half-decade historical view may miss new industry trends or demand cycles. AMETEK’s recent performance shows its demand has slowed as its annualized revenue growth of 5.1% over the last two years was below its five-year trend. We also note many other Internet of Things businesses have faced declining sales because of cyclical headwinds. While AMETEK grew slower than we’d like, it did do better than its peers.

This quarter, AMETEK reported year-on-year revenue growth of 10.8%, and its $1.89 billion of revenue exceeded Wall Street’s estimates by 4.3%.

Looking ahead, sell-side analysts expect revenue to grow 6.8% over the next 12 months. While this projection implies its newer products and services will fuel better top-line performance, it is still below the sector average.

All else equal, we prefer higher gross margins because they usually indicate that a company sells more differentiated products and commands stronger pricing power.

AMETEK’s gross margin is good compared to other industrials businesses and signals it sells differentiated products, not commodities. As you can see below, it averaged an impressive 35.6% gross margin over the last five years. That means for every $100 in revenue, roughly $35.57 was left to spend on selling, marketing, R&D, and general administrative overhead.

AMETEK’s gross profit margin came in at 36.3% this quarter, in line with the same quarter last year. Zooming out, the company’s full-year margin has remained steady over the past 12 months, suggesting its input costs (such as raw materials and manufacturing expenses) have been stable and it isn’t under pressure to lower prices.

AMETEK 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 25.1%. This result isn’t too surprising as its gross margin gives it a favorable starting point.

Looking at the trend in its profitability, AMETEK’s operating margin rose by 2.4 percentage points over the last five years, as its sales growth gave it operating leverage.

This quarter, AMETEK generated an operating margin profit margin of 25.8%, in line with the same quarter last year. This indicates the company’s cost structure has recently been stable.

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

AMETEK’s EPS grew at a remarkable 13% compounded annual growth rate over the last five years, higher than its 9% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

Diving into AMETEK’s quality of earnings can give us a better understanding of its performance. As we mentioned earlier, AMETEK’s operating margin was flat this quarter but expanded by 2.4 percentage points over the last five years. This was the most relevant factor (aside from the revenue impact) behind its higher earnings; interest expenses and taxes can also affect EPS but don’t tell us as much about a company’s fundamentals.

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

For AMETEK, its two-year annual EPS growth of 8.3% was lower than its five-year trend. We hope its growth can accelerate in the future.

In Q3, AMETEK reported adjusted EPS of $1.89, up from $1.66 in the same quarter last year. This print beat analysts’ estimates by 7.4%. Over the next 12 months, Wall Street expects AMETEK’s full-year EPS of $7.29 to grow 4.2%.

Although earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can’t use accounting profits to pay the bills.

AMETEK has shown terrific cash profitability, putting it in an advantageous position to invest in new products, return capital to investors, and consolidate the market during industry downturns. The company’s free cash flow margin was among the best in the industrials sector, averaging 21.5% over the last five years.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).

Although AMETEK hasn’t been the highest-quality company lately, it historically found a few growth initiatives that worked. Its five-year average ROIC was 12.9%, higher than most industrials businesses.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Uneventfully, AMETEK’s ROIC has stayed the same over the last few years. Given the company’s underwhelming financial performance in other areas, we’d like to see its returns improve before recommending the stock.

AMETEK reported $439.2 million of cash and $2.46 billion of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $2.29 billion of EBITDA over the last 12 months, we view AMETEK’s 0.9× net-debt-to-EBITDA ratio as safe. We also see its $73.56 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

We were impressed by how significantly AMETEK blew past analysts’ revenue expectations this quarter. We were also glad its full-year EPS guidance exceeded Wall Street’s estimates. Zooming out, we think this was a good print with some key areas of upside. The stock traded up 3.9% to $191.40 immediately after reporting.

Updated: December 4, 2025 at 10:14 PM EST

Are you wondering whether to buy AMETEK or pass? We urge investors to not only consider the latest earnings results but also longer-term business quality and valuation as well.

AMETEK isn’t a bad business, but we have other favorites. First off, its revenue growth was solid over the last five years, and analysts believe it can continue growing at these levels. And while AMETEK’s flat organic revenue disappointed, its powerful free cash flow generation enables it to stay ahead of the competition through consistent reinvestment of profits.

AMETEK’s P/E ratio based on the next 12 months is 25.5x. Investors with a higher risk tolerance might like the company, but we don’t really see a big opportunity at the moment. We're fairly confident there are better stocks to buy right now.

Wall Street analysts have a consensus one-year price target of $219.94 on the company (compared to the current share price of $198.96).