Company Reports

We are refreshing our thoughts on Mettler-Toledo and maintaining our narrow moat rating based on its leading market share across product lines and geographies, its high-quality brand name, and modest switching costs inherent in its business. After reevaluating Mettler’s ability to weather market cyclicality and protect both top and bottom lines relatively well in economic downturns, we lowered our cost of capital assumptions to 6.9% from 8.6%, previously. As a result, our fair value estimate rose to $1,200 per share from $880. We view shares as modestly overvalued.

Mettler-Toledo is the global market leader in laboratory and industrial scales and balances and holds a leading position in product inspection. Apart from its majority share in laboratory balances, the company operates in competitive markets and holds an average share of about 25% across most product lines. While the competitive nature of these markets makes incremental share gains somewhat difficult, Mettler's intense focus on internal sales and marketing initiatives combined with its ongoing efficiency programs have helped the company defy trends in its relatively slow-growing end markets.

Narrow-moat Mettler-Toledo posted first-quarter results that were better than anticipated, despite the weaker conditions that persisted across the business. The solid start to the year suggests that normalization could be coming soon, and this leads us to maintain our $880 fair value estimate after confirming that our 2024 and longer-term forecasts appear intact. Shares still look overvalued, especially after the stock rose on these strong results.

We are maintaining our $880 fair value estimate for narrow-moat Mettler-Toledo as fourth-quarter and full-year 2023 results were about as expected. Following the January announcement of shipping delays impacting sales late in the fourth quarter, we updated our model to temper our 2023 revenue and adjusted EPS forecasts while lifting our respective 2024 forecasts to reflect the anticipated recovery in sales in first-quarter 2024. Shares currently look overvalued relative to our unchanged valuation.

Mettler-Toledo is the global market leader in laboratory and industrial scales and balances and holds a leading position in product inspection. Apart from its majority share in laboratory balances, the company operates in competitive markets and holds an average share of about 25% across most product lines. While the competitive nature of these markets makes incremental share gains somewhat difficult, Mettler's intense focus on internal sales and marketing initiatives combined with its ongoing efficiency programs have helped the company defy trends in its relatively slow-growing end markets.

We are retaining our $880 fair value estimate for narrow-moat Mettler-Toledo as third-quarter results were about as we anticipated. Given persistent headwinds to top-line growth, including weaker demand in China and broader macroeconomic factors, which we expect to continue in the near term, we have adjusted our forecasts slightly. These changes to our assumptions were largely offset by cash flows generated since our last valuation, resulting in an unchanged fair value estimate. At current prices, the shares appear overvalued.

Second-quarter results for narrow-moat Mettler-Toledo 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.

Life science toolmakers that enable drug production operate attractive businesses for two major reasons that investors often find compelling. First, regulation of the drug manufacturing process creates highly durable switching costs for end users and long potential revenue streams for life science toolmakers. Second, life science firms often benefit from broad exposure to biopharmaceutical growth without taking on much product-specific risk.

Narrow-moat Mettler-Toledo delivered solid first-quarter results. Management's guidance change for 2023 was minimal and looks in line with what we are already expecting for 2023. However, based on cash flows generated since our last valuation change, we are slightly increasing our fair value estimate to $880 per share from $830 previously. However, we continue to see shares as significantly overvalued.

Mettler-Toledo is the global market leader in laboratory and industrial scales and balances and holds a leading position in product inspection. Apart from its majority share in laboratory balances, the company operates in competitive markets and holds an average share of about 25% across most product lines. While the competitive nature of these markets makes incremental share gains somewhat difficult, Mettler's intense focus on internal sales and marketing initiatives combined with its ongoing efficiency programs have helped the company defy trends its relatively slow-growing end markets.

Mettler-Toledo is the global market leader in laboratory and industrial scales and balances and holds a leading position in product inspection. Apart from its majority share in laboratory balances, the company operates in competitive markets and holds an average share of about 25% across most product lines. While the competitive nature of these markets makes incremental share gains somewhat difficult, we see opportunity for organic growth and share gains in product inspection, industrial, and food retail. Mettler places an intense focus on sales and marketing and has leveraged its ongoing efficiency programs to expand margins while also retaining customers.

Narrow-moat Mettler-Toledo delivered strong fourth-quarter and full-year results that helped it exceed previous sales and adjusted EPS guidance. Mettler posted revenue growth this quarter of 2% year over year (9% in constant currency) and 5% growth for the full year 2022 (11% in constant currency). After slight adjustments made to our near-term assumptions, we are maintaining our $830 fair value estimate, and shares remain overvalued.

Narrow-moat Mettler-Toledo posted solid revenue growth this quarter of 4% (10% on a constant currency basis). Management has reinforced its full-year 2022 revenue guidance. We have made slight adjustments to our near-term assumptions, but our long-term forecasts are unchanged, and we are maintaining our $830 fair value estimate. Shares appear overvalued.

Mettler-Toledo is the global market leader in laboratory and industrial scales and balances and holds a leading position in product inspection. Apart from its majority share in laboratory balances, the company operates in competitive markets and holds an average share of about 25% across most product lines. While the competitive nature of these markets makes incremental share gains somewhat difficult, we see opportunity for organic growth and share gains in product inspection, industrial, and food retail. Mettler places an intense focus on sales and marketing and has leveraged its ongoing efficiency programs to expand margins while also retaining customers.

Narrow-moat Mettler-Toledo continued its momentum with robust top-line growth in the second quarter as the firm reported sales growth of 6% (10% on a constant-currency basis). We are maintaining our $770 fair value estimate as core top-line results, operating margin and profits are tracking right near our full-year forecasts, and our long-term forecasts are unchanged.

Narrow-moat Mettler-Toledo had unexpectedly strong growth in the first quarter, with reported sales rising 12% (14% on a constant-currency basis). It saw some margin improvement as well. We maintain our $770 fair value estimate and believe the shares remain overvalued despite recent declines.

Narrow-moat Mettler-Toledo International ended the year on a high note with double-digit growth and margin gains, and we are increasing our fair value estimate to $770 per share from $710. About half the increase is from our expectation that the U.S. corporate tax rate is likely to remain at 21%; time value of money and stronger-than-expected business performance also contributed to the change. The shares have traded relatively flat over the past few months, though they remain materially overvalued, in our view.

Mettler-Toledo is the global market leader in laboratory and industrial scales and balances and holds a leading position in product inspection. Apart from its majority share in laboratory balances, the company operates in competitive markets and holds an average share of about 25% across most product lines. While the competitive nature of these markets makes incremental share gains somewhat difficult, we see opportunity for organic growth and share gains in product inspection, industrial, and food retail. Mettler places an intense focus on sales and marketing and has leveraged its Spinnaker and SternDrive programs to operate with high efficiency and maintain strong customer retention.

Most medical technology and device companies under our coverage have economic moats, but attractive valuations are hard to find, and the sector trades at an average price/fair value estimate of 1.33.

Narrow-moat Mettler-Toledo had another strong quarter and raised guidance, and growth momentum looks set to continue into 2022, led by the lab business and a recovering industrial segment. We are increasing our fair value estimate to $710 per share from $670, with $20 of the increase due to the time value of money, and an additional $20 from ongoing better-than-expected performance. With shares trading above $1,400 as of Nov. 5, the stock remains materially overvalued, in our view.