Q1 Earnings Winners: Standex and the Gas/Liquid Handling Sector's Resilience

The gas and liquid handling sector faced a mix of headwinds and tailwinds in Q1 2025, yet select companies demonstrated resilience through strategic execution, margin discipline, and acquisitions. standex international (NYSE:SXI) emerged as a standout performer, though the broader sector also saw strong contributions from Flowserve (NYSE:FLS), SPX Technologies (NYSE:SPXC), and others. Here’s an in-depth look at their results and implications for investors.

Standex: Margin Strength Amid Revenue Challenges

Standex’s Q1 results were a tale of two halves. While revenue fell 7.7% year-on-year to $170.5 million, its adjusted operating margins held steady at 16.0%, driven by cost-cutting and favorable product mix. The company beat EPS estimates by $0.03, reaching $1.71 adjusted diluted EPS, and raised its dividend by 6.7%.

The star of its portfolio was the Engineering Technologies segment, which grew revenue 12.7% YoY on demand for defense and space applications. However, the Engraving and Specialty Solutions segments struggled, declining 18.2% and 18.3% YoY, respectively, due to weak European markets and overstocking.

Ask Aime: How did Standex International's Q1 results affect its stock's performance?

The acquisition of Amran/Narayan Group—its largest ever at $200 million—is pivotal. This move expands Standex’s footprint in high-margin electrical grid markets, which benefit from global infrastructure upgrades and data center demand. Analysts now project the deal to be “immediately accretive”, with net leverage falling below 1.0x within two years.

Sector Stars: Flowserve, SPX, and Helios Lead the Charge

While Standex faced near-term headwinds, peers like Flowserve and SPX Technologies delivered stronger top-line growth and investor confidence:

1. Flowserve (FLS):
2. Revenue: $1.14 billion (+5.2% YoY), beating estimates by 3.6%.
3. Margin Improvement: EBITDA surged on strong bookings and execution under its operational system.

4. Stock Performance: Shares rose 6.7% post-earnings, reflecting investor optimism about its role in critical infrastructure like nuclear power.

5. SPX Technologies (SPXC):

6. Revenue: $482.6 million (+3.7% YoY), with an EBITDA beat that prompted a 10.3% stock surge.

7. Strategic Focus: The company raised full-year guidance, benefiting from resilience in energy and aerospace markets.

8. Helios (HLIO):

9. Revenue: $195.5 million (-7.8% YoY), but beat EBITDA estimates, driving a 15.6% stock jump.
10. Growth Catalysts: Motion control components for carbon capture and water infrastructure are key long-term drivers.

Underlying Trends and Risks

The sector’s performance reflects broader macroeconomic dynamics:
- Soft Landing Benefits: The Fed’s successful inflation reduction to 2% and post-Trump-election optimism fueled industrial demand.
- Secular Tailwinds: Companies with exposure to electrical grids (Standex), renewables (Flowserve), and carbon capture (Helios) outperformed.
- Near-Term Concerns: Currency headwinds, inventory overhangs (e.g., Standex’s Engraving segment), and 2025 policy risks (tax hikes, trade barriers) linger.

Investment Takeaways

1. Prioritize Margin Resilience: Standex and SPXC’s ability to maintain margins amid revenue dips signals operational excellence.
2. Acquisition-Driven Growth: Standex’s Amran/Narayan deal and Flowserve’s diversification into critical infrastructure are key differentiators.
3. Avoid Cyclical Weakness: Stocks like Ingersoll Rand (NYSE:IR) and Parker-Hannifin (NYSE:PH), which missed EBITDA targets, highlight risks in overexposure to cyclical markets.

Conclusion: A Sector Divided, But Opportunities Abound

The gas and liquid handling sector is bifurcating into winners and laggards based on strategic execution and alignment with secular trends. Standex, Flowserve, and SPX Technologies lead the pack due to:
- Margin Discipline: Standex’s 16% operating margins and SPXC’s EBITDA beat underscore cost management.
- Strategic Acquisitions: Standex’s Amran/Narayan deal and Flowserve’s tech leadership in pumps provide long-term growth.
- Sector Exposure: Companies tied to electrical grids, renewables, and carbon capture (e.g., Helios) are best positioned for 2025 and beyond.

While risks like trade policies and margin pressures persist, the sector’s average post-earnings stock gain of 6.1%-9.1% signals investor confidence. Investors should favor firms with diversified end markets, acquisition pipelines, and exposure to decarbonization—making SXI, FLS, and SPXC top picks for 2025.

For those willing to navigate near-term volatility, the gas/liquid handling sector offers a compelling blend of resilience and long-term growth potential.