EUR 850.00 For Business Accounts Only

Morningstar | Mettler Should Largely Offset Tariff Effect via Productivity Improvements

Although Mettler-Toledo's mature business model does not provide significant expansion opportunities, the company has been able to locate and take advantage of a few pockets of growth. It is a notoriously efficient operator, and its execution has historically been so superb that investors have typically rewarded it with a substantially higher multiple than its faster-growing peers.The market for Mettler's instruments exhibits slow growth, primarily stemming from the commoditized nature of its weighing products. Laboratory balances and industrial and retail scales lack the pizzazz of high-end research equipment and have long replacement cycles, influenced largely by macroeconomic factors. Additionally, the majority of Mettler's instruments do not require ongoing purchases of disposable supplies, leaving the firm exposed to capital spending cycles. On the flip side, the typically slow-growing market where Mettler competes doesn't have the allure or sufficient size to invite larger competitors. This, coupled with the firm's strong research and development platform and established customer relationships, provides the foundation of the company's narrow moat.While the overall market for weighing instrumentation hasn't been a high grower in the past, Mettler has historically managed to generate above-average top-line growth as a result of its focus on higher-priced products and market share gains. The firm has also consistently maintained its pricing discipline and is able to achieve annual price hikes even during downturn years. This should hold true even if the macroeconomic environment becomes more challenging and China, the company's best growth driver, decelerates, in part due to current trade and tariff uncertainty. The firm's focus on operating efficiency, profitability, and shareholder returns continues to serve it well, and the lack of value-destroying acquisitions gives us confidence in Mettler's management team.