AMETEK Q2 2022 Earnings Call Transcript

Quartr
Provided by Quartr
August 2, 2022

There are 13 speakers on the call.

Operator

Welcome to the Second Quarter 2022 AMETEK Earnings Conference Call. My name is Richard, and I'll be your operator for today's call. Please press 1 on your touch tone phone. I'll now turn the call over to Kevin Coleman, Vice President of Investor Relations and Treasurer. Mr.

Operator

Coleman, you may begin.

Speaker 1

Thank you, Richard. Good morning, and thank you for joining us for AMETEK's Q2 2022 With me today are Dave Zapico, Chairman and Chief Executive Officer and Bill Burke, Executive Vice President and Chief Financial Officer. During the course of today's call, we will be making forward looking statements, which are subject to change based on various risk factors and uncertainties that may cause actual results to differ A detailed discussion of the risks and uncertainties that may affect our future results is contained in AMETEK's filings with the You see, AMETEK disclaims any intention or obligation to update or revise any forward looking statements. Any references made on this call to 2021 or 2022 results will be on an adjusted basis, excluding after tax, acquisition related intangible Reconciliations between GAAP and adjusted measures can be found in our press release and on the Investors section We'll begin today's call with prepared remarks by Dave and Bill, and then we'll open it up

Speaker 2

for questions. I'll I'll turn

Speaker 1

the meeting over to Dave.

Speaker 2

Thank you, Kevin, and good morning, everyone. AMETEK had another Importantly, demand remains strong and broad based across our diversified niche markets, Leading to impressive organic order growth and a record $3,100,000,000 backlog. Given our second quarter results and our outlook for the back half 2022, we have increased our earnings guidance for the year. Now let me turn to our 2nd quarter results. 2nd quarter sales were a record $1,510,000,000 up 9% over the same period in 21.

Speaker 2

Organic sales were up 12%. Acquisitions added a point and foreign currency was a 3 point headwind in Book to bill was 1.09 in the 2nd quarter, our 8th consecutive quarter of positive book to bill. Operating income in the quarter was a record $365,000,000 a 15% increase over the Q2 of 2021. Operating margins were 24.1 percent in the quarter, up 130 basis points from the prior year with strong incremental margins.

Speaker 3

EBITDA in

Speaker 2

the quarter was a record $444,000,000 up 15% over the prior year with EBITDA margins of 29.3 This outstanding performance led to record earnings of $1.38 per diluted share, up 20 First, the Electronic Instruments Group. Sales for our Electronic Instruments Group were 1.03 Organic growth remains very strong across our EIG businesses with Particularly impressive growth across our Altra Precision Technologies and P and AI 2nd quarter operating income was $265,100,000 up 70% versus the prior year, and operating margins were 25.8 percent in the quarter. The Electromechanical Group also delivered strong sales growth operating performance in the quarter. EMG's 2nd quarter sales were a record $486,300,000 up 7% At 25.6 percent, up 70 basis points versus the prior year. Overall, outstanding results in the quarter, reflecting the quality of our differentiated businesses, the strength of our operating model and the tremendous I would like to thank all AMETEK colleagues for your commitment to AMETEK and for the many important contributions you make to our Now, let me touch on the supply chain.

Speaker 2

Overall, the As we noted previously, we have strategically decided to hold additional inventory of select components to support the strong customer demand And as a hedge against the tight supply chain. Additionally, AMETEK's global sourcing teams are doing an outstanding job working to additional sources of supply. While these supply chain issues are leading to higher inflation, we have been able to more than offset This inflation with higher pricing, leading to a strong price inflation spread again this quarter and outstanding margin expansion. The combination of our global supply chain capabilities and pricing power provides us the confidence in our ability to manage through these uncertain During our Q1 earnings call, we noted that the COVID driven lockdowns across parts of China were expected to delay some China sales from the 2nd quarter into We're able to operate in a closed loop system and adjust our logistics and supply chain networks to support production in Additionally, during the last 2 weeks of the quarter, as restrictions were lifted, we were able to resume multi ship production and The impact of China's 0 COVID policy is something we are closely watching As we may need to react and adjust in the future.

Speaker 2

Thank you to our entire team in China for your tremendous commitment and resilience during Now switching to our acquisition strategy. Our top priority for capital allocation remains Value enhancing strategic acquisitions. Our M and A pipeline is very strong. Our business unit and corporate development teams are busy managing an active As Bill will highlight in a moment, we have a strong balance sheet and excellent cash flows We also remain focused on driving higher levels of organic growth by consistently investing in our businesses to support their strategic growth initiatives. We're seeing the benefits of these investments in stronger organic growth.

Speaker 2

Our investments in research, One measure of the success of these efforts is our vitality index, which was a very strong 26% of sales in the second This level of vitality reflects our business' ability to develop new products aligned with compelling growth One example of this is AMETEK's expansion into the high growth areas of precision optics. AMETEK's ZYGO Based in Midfield, Connecticut, provides leading edge extreme precision optics for the design and protection of very large complicated aspheric lenses. These capabilities supported the manufacture of the 18 hexagonal shaped mirrors, which make up the James Webb Truly amazing images due in part to Zygo's capability. Zygo also provides advanced optical systems Our next generation of semiconductor production equipment. Their incredibly precise mirrors are playing an important role in supporting the across AMETEK of the unique and highly differentiated capabilities and technologies we provide our customers.

Speaker 2

Now turning to our outlook for the remainder of the year. With our strong results in the Q2, continued solid orders momentum And record backlog, we've increased our full year earnings guidance. For the full year, we expect overall sales to be up high single digits With organic sales now also expected to be up high single digits versus our prior guidance of up mid to high single Diluted earnings per share for the year are now expected to be in the range of $5.46 Overall sales to be up in the high single digits compared to the same period last year, and third quarter earnings are expected to be in the range $1.36 to $1.38 per diluted share, up 8% to 10% versus the prior year. While we are closely monitoring the various macroeconomic headwinds, we are not seeing slowing in our businesses as In summary, AMETEK's 2nd quarter results were excellent. Our businesses are well positioned with differentiated technology solutions serving a diverse set of growing niche markets.

Speaker 2

Our organic growth initiatives are driving higher levels of growth And our portfolio is aligned with attractive mid- and long cycle markets. Additionally, our asset light business model and strong cash flows provides us flexibility to navigate challenging environments, while continuing to deploy capital and drive increased shareholder value. Anatek remains firmly positioned to deliver long term sustainable growth. I will now turn it over to Bill Burke, who will cover some of the financial details of the quarter, and then we'll be glad to take your questions. Bill?

Speaker 4

Thank you, Dave. As Dave noted, AMETEK delivered excellent results in the Q2 led by strong sales and orders growth and Let me provide some additional financial highlights for the quarter. 2nd quarter general and administrative from 2021 levels and approximately 1.5% of sales versus 1.6% of sales in In the Q2 of 2021, the lower rate this quarter was driven by lower tax on foreign income. For 2022, we anticipate our effective tax rate to be between 19% 19.5%. And as we've stated in the past, Capital expenditures in the Q2 were $26,000,000 and we continue to expect capital expenditures to be approximately $125,000,000 Depreciation and amortization expense in the quarter was $77,000,000 and for the full year we expect depreciation and amortization to be approximately 315,000,000 Including after tax acquisition related intangible amortization of approximately $148,000,000 or $0.64 per For the quarter, operating working capital was 18% of sales, operating cash flow was $236,000,000 And free cash flow was $210,000,000 in the Q2.

Speaker 4

We expect approximately 100% free cash flow to net income conversion for the full year. Our working capital and cash flow results reflect our strategic decision to add select inventory in certain areas to support continued strong Customer demand and to hedge against the longer lead times we are experiencing across the supply chain. During the Q2, we repurchased 1.44 1,000,000 shares of stock in the open market for approximately $173,000,000 and year to date we've repurchased approximately 2,600,000 Offsetting this debt is cash and cash equivalents of $349,000,000 At the end of the second quarter, our gross debt to EBITDA ratio was 1.4 times And our net debt to EBITDA ratio was 1.2 times. As Dave noted, AMETEK has a robust balance sheet with To conclude, our businesses performed exceptionally well in the Q2, delivering strong sales growth, outstanding operating performance and High quality of earnings in a very challenging environment. We remain well positioned going into the back half of the year and we'll continue to invest strategically

Operator

Thank you. We will now begin the question and answer session. And our first question on the line comes from Allison Poliniak from Wells Fargo.

Speaker 5

Good morning.

Speaker 2

Good morning, Allison.

Speaker 5

Just going back to you, obviously very strong orders and you mentioned you're really not seeing any slowing. Has there been any change in the cadence intra quarter, in terms of what you're seeing coming in whether region or end market? Just any more color there.

Speaker 2

Yes. I mean, we had strong orders each month of the quarter with the strongest month being June, so pretty typical. And we just ended July and our results were strong in July and very consistent with our So there's really continuing order strength. It was we had strength in Both groups, EIG was up 11% and EMG was up 9%. Overall organic growth was up 11%.

Speaker 2

We're growing at healthy rates in all major regions of the world. All sub segments that we operate in are growing nicely. So It feels pretty good from where we sit. In addition to that, we have, as we mentioned in the prepared remarks, a record backlog of $3,100,000,000 and That's about 80% from just prior to the start of the COVID pandemic. And Yes, we're feeling good and we're not seeing any weakness anywhere right now.

Speaker 5

Great. And then there was obviously a step up in inventory again this quarter sequentially. I suspect that's due to some of the orders that you're seeing coming in. How should we think about inventory level as we look to the back half of the year? Is it Stabilizer or is it really just dependent on the orders coming in and some of that supply chain issues that are still out there?

Speaker 4

Yes, I think you've hit on it there, Allison. We're going to continue to react to that.

Speaker 2

So,

Speaker 4

I would say you've hit the nail on the

Speaker 1

head and I think we've

Operator

Our next question online comes from Mr. Josh Pokrzywinski from Morgan Stanley.

Speaker 6

Hi, good morning guys.

Speaker 2

Good morning, Josh.

Speaker 7

Dave, just I guess first question on Europe. I guess the totality of AMETEK is doing well. You mentioned the orders growth. Anything, I guess, underneath the surface or a KPI that you're watching there, because obviously more than macro challenges, Things like energy costs just up a lot. Just wondering any way that that's manifesting itself in your business?

Speaker 2

In the last quarter, orders were up 9% in Europe, and we had notable strength in our Automation and Aerospace businesses, and the Aerospace businesses really started to accelerate. So it feels pretty good from a demand perspective right now, but The geopolitical thing is going on in Russia and Ukraine and the fuel costs in Germany. We're certainly looking watching that very closely as Yes, that may be a sign of the 1st place for it to turn down for us. But right now it's not and Europe is strong and we had a good quarter there. Again, Europe was up 9%.

Speaker 7

Got it. That's helpful. And then just on the Aerospace and Defense side, I think a lot of supply chain bottlenecks starting to get worse in there, not necessarily for the stuff that You guys are producing, but are you seeing that at all either in your supply chain or being told by your customers to kind of throttle back delivery because They're waiting for some other component, to come in and don't want to just kind of be building gliders or Accumulating inventory in the meantime.

Speaker 2

Yes. I mean, Right now, I'd say it's quite the opposite. Our orders in our Aerospace and Defense business were up low double digits in the quarter. Our commercial business was up Stronger and it grew mid teens and the strongest growth was in the commercial asset market and Defense market was up low single digits for us better than in the Q1. So we're looking at a very strong 2nd half and most of the interactions we have with our customers are asking us for more.

Speaker 2

So We're not seeing any slowdown in demand or anything and I didn't think that markets because of pent up demand has got A long cycle of growth ahead of it.

Speaker 7

Got it. That's helpful. And then just one more cleanup, if you don't mind. What was price in the quarter?

Speaker 2

Right. So in the second quarter, our price continued to more than offset inflation. Pricing was about 6 And inflation was about 5% of sales. So we maintained about 100 basis point spread and The results speak to the highly differentiated nature of the AMETEK product portfolio and our leadership position in niche markets. We think about as we had 6% volume growth and 6% price growth and 12% organic growth.

Speaker 2

So we think It was a really good quarter from that viewpoint.

Speaker 6

Tim, are you with that? Okay.

Speaker 2

Thank you, Josh.

Operator

Thank you. Our next question online comes from Nigel Coe from Wolfe Research.

Speaker 8

Thanks. Good morning. I certainly echo those comments. So just on the 3rd quarter outlook for mid single digit sales growth in context of 12% this quarter, just wondering, Yes, especially with the order rates pretty strong as well. What's coloring that mid single digit outlook?

Speaker 8

I'm just wondering if we should be looking at the upper end of the mid single digits, you can give me a

Speaker 2

bit more specific

Speaker 8

to that? Yes.

Speaker 2

If you dig into it, the guide actually reflects mid to high single digits Because we have some currency headwinds and really quarter 3 is a kind of a carbon copy of quarter 2. And we have a little bit of seasonality in quarter 3 because of our European exposure, but the difference between quarter 2 and quarter 3, we're expecting a little higher So, we would consider it appropriately conservative, but there are some dynamics with tax sequentially And the organic rate is mid to high, so it's not mid currencies holding us back a bit.

Speaker 8

And the comp is tougher, but I think if you just comp adjust it, 12% goes to maybe 9%. So just wondering if that was how you thought about it. And then on the margins, obviously very strong. It seems like price cost is at least neutral to margin rate, not dollar, but margin rate. If you just maybe confirm that.

Speaker 8

And then just wondering if there's any geographic impact from obviously Europe is pretty strong, but was there any geo impact to the margin this quarter?

Speaker 2

No, I mean, when I look at the margins for the whole business, it was up 130 basis points as reported and 140 basis points core. So you really see strong flow through price and when you look at total cost of sales, I think the margins improved there. Ian, strong in both groups. The MG margins were up 70 basis points and EIG margins were up 150 basis points as reported and We had very healthy core incrementals of 40%. I reported 38 core incrementals of 38 40%.

Speaker 2

It feels like we're more than offsetting inflation with price and we're getting margin expansion. So I think it's a great margin story and our teams are really executing in their business as well.

Speaker 8

No question. Thanks guys.

Speaker 2

Thank you, Nigel.

Operator

Thank you. Our next question online comes from operator Lindsey from Mizuho Americas.

Speaker 9

Hi, good morning all.

Speaker 2

Good morning, Brett. First question

Speaker 9

is just on inventories and more I know a lot of your businesses tend to be 2 to 3 linkages upstream from end use or final assembly. Just curious what level of visibility you might have into some of those value chains and your assessment Versus those levels in relative to end demand?

Speaker 2

Yes. If you think about our Electronic Instruments group, we're Largely selling to end users there, so we have a good view of the end user and our products are customized. So we don't have the Problem of people double ordering, there could be over ordering, but they're not ordering to put stuff on the shelf just in case because these are expensive, Customized highly engineered products. When you think about our EMG business that has more of the we're back on the food chain a couple of levels like you talked about and Yes, you could have a backup there, but we're not seeing it right now and it's indicated by our strong orders growth. So It feels like we're in the right areas and demand is still growing and we're pretty optimistic about the second half of the year.

Speaker 9

Okay, great. And then just back to price cost, so price 6%. How are you thinking about some of the wraparound price into early 2023 Based on some of the midyear actions and just curious on price cost, what that might look like in terms of a tailwind As we get into 2023 and what the kind of volume or incrementals or decrementals could look like for the algorithm for 2023?

Speaker 2

Right. It's a little early to start talking about 2023, but the same pricing strategy that we've employed We'll continue. When we think about the second half of the year, we want to maintain that 100 basis point spread that we had in the Q2, so the difference between 6% and 5% of sales is 100 basis points. We want to continue that in 2nd half of the year and the future pricing is going to be a big part of our budget discussions and we think inflation is going to is going to be here for a while, so that's going to influence our thought process. So I would expect to maintain a positive spread into next year also.

Speaker 9

And just a quick follow-up, would you say the complexion of a lot of your pricing actions is more less normal course versus surcharges or anything you can share there?

Speaker 2

It's a combination of both. I mean, it's list, but in a lot of situations, there are we're tied to certain indexes And for shipping and things like that where commodities there could be a retracement of it, but most of it is in the base price. So we try to get it in base price, but in some situations it's obvious, it's transparent with your customer and you have to give it back when things go down. But at the same We're saying we'll maintain that 100 basis points spread for the second half of the year.

Speaker 9

Okay, great. Good quarter. Thanks.

Speaker 2

Thank you, Fred.

Operator

Thank you. Our next question online comes from Jeff Sprague from Vertical Research.

Speaker 10

Thank you. Good morning, everyone.

Speaker 2

Good morning, Joe.

Speaker 10

Hey, good morning. So let me talk about the kind of The deals that were done last year that have sort of kind of anniversaried here in the last month or 2 or 3, How they're performing now as they kind of last year and are anniversaried into the portfolio? And Any change in your view of kind of the accretion outlook for those businesses?

Speaker 2

No, I think the outlook for all the This is positive and we're really pleased to have bought them all and the management teams are now getting embedded into AMETEK. I'd make The business has had the same problems with supply chain that we experienced across our businesses, and those problems were more Experienced in the Electronic Instruments Group, they were impacted us a lot and But the second half of the year, we took the opportunity to realign those businesses, get them Integrated into AMETEK and for the second half of the year, I really think we're going to have some significant momentum in H2 related to those deals. So, we've made a lot of progress during the 1st year and I think into the second half of this year and Also 2023, I really see significant momentum.

Speaker 10

And I missed the first couple of minutes of the call, David. Did you say anything about Kind of the current deal pipeline or kind of potential actionability on things as you look here into the balance of the year?

Speaker 2

No, that's a good question, Jeff. I mean, we remain very active. We mentioned that in our We're looking at multiple deals. As always, we're focused on long term returns. One of the things I'm excited about is our debt profile.

Speaker 2

About 86% of our debt is long term and fixed at a 3.2% interest So if there's a if interest rates rise, it's really going to have limited effect on us. As Bill mentioned in his prepared remarks, we have no debt maturities in We recently upsized our revolver. So we're in a very good position to be in terms of Executing our M and A strategy. And as I said, our pipeline is strong and I expect you'll be hearing from us in the

Speaker 10

Great. Thanks. I'll leave it there. Thank you.

Operator

Our next question on the line comes from Andrew Obin from Bank of America.

Speaker 2

Hey, good morning. Hi, Andrew.

Speaker 11

Just another question on price and volume. In terms of your guide raise, How much of it was price and how much was better volumes in the second half? And I appreciate that there is FX

Speaker 2

So we're not giving that information out. It's really tough to understand that what we're saying is we'll maintain a spread of 100 basis It's positive and it's a very complicated when you take into account FX and our different mix of businesses And what's happening in the market with some commodity starting to come down. So but what we're saying is we'll maintain a 100 basis point spread between price and inflation in the second

Speaker 11

Got you. And just to follow-up on Jeff's question on M and A. You have Bottoms up, a lot of your M and A activity is sort of bottoms up in the organization. Are you Hearing anything new from your business units as they chase these market leaders? Do you take a look at SPACs?

Speaker 11

Are you seeing private equity back away? Any change in behavior? Anything different about this market versus where we were maybe 6 to 12 months ago? Thanks.

Speaker 2

Yes. I mentioned in a prior call that the multiples were very high. And for quality assets, they're still attracting a bit of a premium, but the multiples between public and private markets They're coming in. They're coming closer together. And if you have to go out and finance a deal, and AMETEK can pay from It gives us an advantage right now because there is some difficulty in getting financing impacting some private equity potential Buyers and sellers for that matter.

Speaker 11

Appreciate it. Thanks a lot.

Speaker 2

Thank you.

Operator

Thank you. Our next question online comes from Mr. Matt Summerville from D. A. Davidson.

Operator

Please go ahead.

Speaker 3

Hi, this is Will Jellison on for Matt Summerville this morning. So on the call you mentioned, the supply chain actions that you're taking including some Supply diversification. And I was wondering, bigger picture across the last year plus of supply chain challenges you faced, Are there any best practices that you've learned about throughout the organization that you would want to sustain even when supply chains reach more normalized levels in the future?

Speaker 2

It's a great question and I think we learned several things. We learned that our business model is fundamentally sound Because our distributed business model having those committed P and L managers running their business units, they really drive their business And there's a good interaction between them and the centralized corporate supply chain team. We also learned that our engineering capability is first rate They saw shortages through redesign and qualified component substitution through this whole time. We did Probably one thing that will change is how we purchase electronics going forward. We're looking for to leverage our And more and develop closer relationships with both the semiconductor chip manufacturers and the distributor For that matter, so it will be a little bit of a change in that area.

Speaker 2

That's one thing I can put to. We're being more direct as opposed to relying on distribution. But fundamentally, it's navigating through this as we did, Dealing with these challenges, we've had excellent results and it's as I said, key from my view is our distributed business model. We have people Owning these businesses and making good decisions and our strong engineering capability is also a key factor to help us solve these Shortages and redesigning find qualified component substitutions. So did that answer your question?

Speaker 3

Yes, that was great. Thank you. Okay. And then absolutely. And then as a follow-up, I was wondering to the point that you made about Having content on the James Webb Telescope, I was wondering if events like that, that are highly visible of

Speaker 2

I think in the research community, it really stands out and it does Drive customers to us and the other thing I mentioned in the EUV market designing and developing optics there, There's really only a couple of people that can do it, so Zygo is really already well known. But those type of events do help us and They drive customers to us because they see our expertise and it also is positive for our employees to see that kind of thing and how we're Improving the world. So it does help and we have a lot of businesses like that around AMETEK.

Speaker 3

Understood. Thanks for taking my questions.

Speaker 2

Thank you.

Operator

Thank you. Our next question online comes from Mr. Joe Giordano from Cowen.

Speaker 6

Hey, guys. Good morning.

Speaker 2

Good morning, Joe.

Speaker 6

Hey, just curious just the way you guys are set off like when we think about the CHIPS Act, what does that have to How do you think about the impact? Are you kind of agnostic as to where a plant is built globally? Or is this helpful that it The U. S. Is incentivizing it specifically?

Speaker 2

Yes. I'd say in general or agnostic wherever it's built in the world, going to have our fair shot at it, but what's happening now is there's probably going to be some incremental capacity put in to satisfy things like security and national defense. And I think it's like security and national defense and with more opportunities we'll certainly get Fair share of our business there.

Speaker 6

Perfect. And then Dave, can you go through kind of like any changes in the outlook by market? Yes.

Speaker 2

Yes. I think on our process businesses, Organic sales for process were up low double digits in the quarter. They had a very broad based growth across essentially all process businesses. And you take that all in and now we're expecting organic sales for process businesses to be up high single So we raised that. Aerospace and Defense, organic sales for our Aerospace and Defense businesses were up low double Growth across each segment.

Speaker 2

Total commercial sales were up mid teens in the quarter with strong growth Commercial OEM and Aftermarket and Defense sales were up low single digits. So stronger in Commercial, but Defense was growing also. And for the full year, we now expect organic sales to be up high single digits for our A and D businesses With growth in both commercial and also defense. And if you look at our power, power and industrial businesses, Excellent in the quarter, up mid teens on a percentage basis with notable strength in our programmable power business And we now expect organic sales in our Power and Industrial businesses to be up high single digits. So that was raised also.

Speaker 2

And finally, our Automation And Engineered Solutions, really good quarter in both Automation and Engineered Solutions, both seeing strong growth and We raised the year for that segment also to be high single digits. So We're reflecting the strength of our businesses and improved organic guide for the rest of the year and really all those sub Now forecasted to grow at high single digits.

Speaker 11

Thanks.

Speaker 2

Okay, Joe. Thank you.

Operator

Thank you. Our next question comes from Mr. Scott Graham from Loop Capital Markets.

Speaker 10

Yes. Hi. Good morning, Dave, Bill and Kevin, hey, yes, so thanks for doing that. Just now you saved me a question. Can you just give us the productivity number in the quarter and the expectation for the year?

Speaker 2

Yes. Cost savings in the quarter was $35,000,000 so really good quarter and We're getting a lot of that through value engineering. We're redesigning some of these things and getting them designed at a lower cost level. So that's helping us a lot. And for the year, the cost savings number is $125,000,000

Speaker 10

Okay. So no change there.

Speaker 2

No change. About half of it's OpEx and half of it is materials. Okay.

Speaker 10

Thank you. You went through a longer Sort of acquisition response, then I've heard you before. It sounds to me like You're even signaling that more than signaling you said expect second half deals. Could you kind of is this a situation where things have just sort of been lined up at the gate and there's going to be a couple of different You know, closings of deals

Speaker 1

do you

Speaker 10

think, perhaps your comment was directed more at one in particular, just I mean, how close are we on some? Did we lose any? Just maybe a little bit more color on what you're thinking on the second half.

Speaker 2

Yes, you never can tell with deals, Scott. And things can happen and things can change. But I feel really confident right now because the volume of deals that we're looking at and processing and having some positive interactions are high. And they're both the typical deals that AMETEK has and there are some that are on the bigger size within the constraint of the types of deals we look at. So Yes, we're busy with deals.

Speaker 2

We're busy and we got our people are real busy and the situation that I talked about with our strong balance sheet, the fixed debt, The strong cash flow, we think that's going to be a differentiator for us as we look into the second half of the year in 2023.

Speaker 10

Thank you for that, Dave. Just one more if I may.

Speaker 12

The unbundling

Speaker 10

of the organic and for the full year, the up high single digits really for All 4. Could you tell us of those 4, which ones are maybe a little bit more That you're optimistic on the second half because obviously in the second quarter you did better than we all expected on organic. So sort of how much of those raises were because The second quarter was better versus what you're seeing in the second half?

Speaker 2

Good question. And in general, we had a good second quarter across the board. The one area That I point out is the order growth rates in the commercial aerospace market were one of the things that caught my attention. So I'm looking for some Positive is there in the second half of the year and into 2023.

Speaker 1

Very good. Thanks.

Speaker 2

Thank you.

Operator

Thank you. Our next question online comes from Mr. Brett Hartman from Melius Research.

Speaker 12

Hey, good morning everyone.

Speaker 2

Good morning, Brett.

Speaker 12

Thanks for taking my question. You've already given good color on price cost, but I just wanted to get more of a sense on what you're seeing in terms of Cost inflation in particular and your outlook going forward. Sorry if I missed this, but inflation impact was 4% last quarter, 5% this quarter, you've said supply chain is so bad for electronic components in particular and that inflation will be here for a while. But I'm just wondering, do you expect The inflation impact in general across your business to continue to increase or is it sort of plateauing or decreasing as

Speaker 2

we move through the rest of the year? Yes, that's a good question. What you really see is some things are coming back in, decreasing in price like inflation or like the commodities. But at the same time, you have wages and other areas that are increasing. So the net effect is Inflation is still increasing.

Speaker 2

It went from 4% to 5% sequentially in the quarters. And right now, I think that that's going to Stabilize at that, but it's difficult to predict. That's why we have things in place. We're going to maintain that 100 basis points positive Fred, but clearly there are different dynamics that are happening right now where some things are coming back in and some things are still inflating, but the net Still increasing costs. So we got a good system to manage that, but that may change over the next quarter and we'll tell you about it.

Speaker 2

But

Operator

We have no further questions at this time. I will now turn the call over to Kevin Coleman for closing remarks.

Speaker 1

Thank you again, Richard, and thanks everyone for joining our conference call today. As a reminder, a replay of today's webcast may be accessed in the Investors section

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