Ametek

AMETEK competes in thousands of narrow applications where precision, reliability and regulatory qualification matter. Once its sensors, analyzers, power supplies, metrology systems or motors are designed into a customer platform, re‑qualification costs, downtime risk and certification hurdles create meaningful switching costs.

In EIG, 2024 operating margins of about 30.7% reflect product differentiation and pricing latitude; EMG’s margins are lower but rising as integration synergies are realized. These economics and the breadth of installed base indicate durable intangible‑asset and switching‑cost moats rather than network effects.

Morningstar’s 2024 upgrade to a wide moat aligns with our view, though we still model moat pressure risks from lower‑cost Asian competitors, open architectures and rapid advances in semiconductor tools.

Evidence of pricing power shows up in steady margin expansion and explicit pricing actions to offset tariffs and input cost volatility. In Q2 2025 operating margin was 26.0% and management referenced targeted pricing and supply chain localization to mitigate tariff impacts.

The mission‑critical nature of many SKUs (aerospace, medical, power quality, ultra‑precision) further supports willingness to pay. Risks: cyclical pauses in project approvals (process, research, semi) can cap near‑term price realization.

AMETEK’s diversity across end markets and geographies (about 47% international in Q2 2025) and large backlog underpin relatively steady growth through cycles. Orders and backlog both increased year over year at mid‑2025, and management’s full‑year guidance implies mid‑single‑digit sales growth despite soft spots in certain verticals.

Still, the business is not a pure subscription model and retains sensitivity to capital budgets in industrial, research and semi markets, so we assign an 80 rather than a higher score.

Free cash flow generation is excellent: 2024 FCF was 1.70 billion dollars on 1.83 billion dollars operating cash flow, and we estimate TTM FCF of about 1.68 billion dollars through June 30, 2025. Net debt fell to roughly 1.32 billion dollars with a net debt to capital ratio of 11.3% and weighted average interest rate on borrowings of about 3.4% as of 2024, indicating ample coverage.

Available revolver capacity exceeded 2.2 billion dollars at mid‑2025, leaving acquisition and buyback flexibility even after the FARO close.

AMETEK’s growth model emphasizes operational excellence, organic innovation and disciplined bolt‑ons.

From 2023 to 2025 it executed multiple acquisitions: Paragon Medical and others in 2023, Virtek in 2024, Kern in January 2025, and FARO in July 2025. Integration costs temporarily diluted EMG margins in 2024 but margins recovered in 2025, consistent with the firm’s track record.

Capital returns remain balanced: an 11% dividend increase to 0.31 dollars per share quarterly and a new 1.25 billion dollar repurchase authorization. We view M&A discipline as strong, with risk centered on integration and returns on larger deals like FARO.

Chairman and CEO David A. Zapico has led since 2016 with consistent execution against the AMETEK Growth Model. Dalip M. Puri is EVP and CFO as of the 2024 Form 10‑K.

Management targets double‑digit EPS growth over the cycle and superior returns on total capital, and has navigated inflation, tariffs and supply constraints while expanding margins and raising guidance in 2025. We view governance, incentives and disclosure quality as strong.

Key person risk is modest given the depth of the decentralized operating structure.