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Roper Industries Inc. (ROP - Analyst Report) reported first-quarter 2014 non-GAAP earnings of $1.46 per share, convincingly beating the Zacks Consensus Estimate of $1.35 per share.

Quarter Details

Roper’s total revenue increased 13.1% year over year to $834.0 million in the quarter. Revenues beat the Zacks Consensus Estimate of $829.0 million. Acquisitions and divestitures accounted for 5.0% of the revenue growth in the quarter. Organic revenues increased 7.0% on a year-over-year basis.

Growth across most of its business segments contributed to the year-over-year increase in revenues. Revenues from Medical & Scientific Imaging and RF Technology increased 27.8% and 8.1%, respectively. Industrial Technology and Energy Systems & Controls moved up 8.1% and 6.5%, respectively, compared with the year-ago quarter.

Gross profit increased 16.0% year over year to $488.9 million. Gross margin in the reported quarter increased to 58.6% from 57.2% in the year-ago quarter, primarily driven by a better mix and higher revenues.

Income from operations increased 20.6% year over year to $223.4 million. The upside in operating income was attributable to improved sales. Operating margin improved from 25.1% to 26.8% on a year-over-year basis.

Net income was $147.2 million or $1.46 per share compared with $124.9 million or $1.25 per share in the year-ago quarter.

Roper exited the quarter with $502.9 million in cash and cash equivalents and total debt of $2.30 billion (including the current portion), compared with $459.9 million in cash and cash equivalents and total debt of $2.60 billion (including the current portion) in the previous quarter. Roper reported free cash flow of $202.2 million at the end of the first quarter.

Guidance

Roper expects second quarter adjusted earnings to be between $1.46 and $1.51 per share For the full year, the company expects adjusted earnings to be in the range of $6.22 - $6.36 per share, which is up from the previous guidance of $6.05 - $6.25 while the Zacks Consensus Estimate for the same is pegged at $6.17 per share.

Recommendation

Roper reported encouraging first quarter results. Also, management provided upbeat guidance for the upcoming second quarter of 2014 as well as for the full year 2014.

We believe that a strong backlog coupled with robust organic growth will drive earnings going forward. Moreover, accretive acquisitions will expand the company’s product portfolio, providing it a significant competitive edge over its peers.

However, macroeconomic concerns, integration issues due to acquisitions and competition from Danaher Corp. (DHR - Analyst Report), Dover Corp (DOV - Analyst Report) and Ingersoll-Rand Plc (IR - Analyst Report) are possible headwinds for the company.

Currently, Roper has a Zacks Rank #3 (Hold).

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