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FLIR Systems' (FLIR) Q3 Earnings: What's in the Cards?
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FLIR Systems Inc. is slated to report third-quarter 2016 results, before the opening bell on Oct 26.
Last quarter, the company had posted a negative surprise of 2.9%. Also, the company has missed estimates in each of the last four quarters, resulting in an average negative surprise of 4.0%.
Let's see how things are shaping up for this announcement.
Factors to Consider
FLIR Systems’ third-quarter results are likely to benefit from the company’s diversified portfolio and diligent restructuring actions. Over the past three years, the company has systematically streamlined its businesses by shutting non-profitable units. These actions have had a positive impact on its key metrics like revenue, operating income, operating margin, adjusted net income and adjusted EPS. We believe that such restructuring initiatives will likely improve the company’s operating efficiency and cost structure. This, in turn, will prove conducive to margin growth for the soon-to-be reported quarter.
In addition, increased adoption of thermal imaging in a broad spectrum of applications, ranging from military to personal hand-held cameras and Smartphones, have been fuelling the growth of FLIR Systems’ imaging & threat-detection technologies. Especially, products based on Infrared Guided Measurement and Lepton thermal camera core technologies have been witnessing impressive market traction, driving top-line growth.
During third-quarter 2016, FLIR Systems introduced thermal fire sensor, FLIR RSX-F and an airborne thermal imaging system, Star SAFIRE 380-HLDc. Other notable products unveiled during the third quarter include Surveillance segment’s gimball platform, Star SAFIRE 380-HLDc, Instruments segment’s IGM test and measurement product, DM284 and OEM & Emerging segment’s popular Vue series of thermal cameras. These products are anticipated to propel revenues for the third quarter.
This apart, FLIR Systems’ impressive government business and strategic acquisitions are also expected to drive third-quarter financials. The company has fortified its hold in the full-spectrum end-to-end security system domain post DVTEL buyout. Also, the acquisitions of sporting and tactical scopes firm – Armasight – and security hardware and software solutions provider – Innovative Security Designs – are estimated to boost the company’s top line for the quarter.
Despite these positives, volatile macroeconomic environment has been playing a major spoilsport for the company. Precipitous decline in client spending and capital investments over the past few quarters are likely to hurt the company’s financials for the quarter to be reported. During second-quarter 2016, delays in licensing processes for international customers have pushed approximately $20 million of revenues into the second half of the year. Persistent weakness may further affect revenues.
This apart, multiple factors including product mix changes, manufacturing cost absorption, adjustments in inventory and rise in competitive pressure in security retail channels are putting profits under pressure. Also, unfavorable product mix may prove to be a drag on the operating margin. Furthermore, as a major portion of FLIR Systems’ sales originates outside the U.S., the company remains vulnerable to currency fluctuations. In addition, strong competition, volatility of primary markets and vagaries of the spending by key clients are also likely to compound the company’s problems for the soon-to-be-reported quarter.
Earnings Whispers
Our proven model does not conclusively show that FLIR Systems will beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESPand a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below.
Zacks ESP: Earnings ESP for the company is currently 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 44 cents.
Zacks Rank: FLIR Systems’ Zacks Rank #3 when combined with 0.00% ESP makes surprise prediction difficult.
Note that we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Here are some companies which you may consider, as our model shows that they have the right combination of elements to post an earnings beat this quarter:
Veeco Instruments Inc. (VECO - Free Report) with an Earnings ESP of +17.86% and Zacks Rank #1.
Armstrong World Industries, Inc. (AWI - Free Report) with an Earnings ESP of +1.32% and a Zacks Rank #2.
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FLIR Systems' (FLIR) Q3 Earnings: What's in the Cards?
FLIR Systems Inc. is slated to report third-quarter 2016 results, before the opening bell on Oct 26.
Last quarter, the company had posted a negative surprise of 2.9%. Also, the company has missed estimates in each of the last four quarters, resulting in an average negative surprise of 4.0%.
Let's see how things are shaping up for this announcement.
Factors to Consider
FLIR Systems’ third-quarter results are likely to benefit from the company’s diversified portfolio and diligent restructuring actions. Over the past three years, the company has systematically streamlined its businesses by shutting non-profitable units. These actions have had a positive impact on its key metrics like revenue, operating income, operating margin, adjusted net income and adjusted EPS. We believe that such restructuring initiatives will likely improve the company’s operating efficiency and cost structure. This, in turn, will prove conducive to margin growth for the soon-to-be reported quarter.
In addition, increased adoption of thermal imaging in a broad spectrum of applications, ranging from military to personal hand-held cameras and Smartphones, have been fuelling the growth of FLIR Systems’ imaging & threat-detection technologies. Especially, products based on Infrared Guided Measurement and Lepton thermal camera core technologies have been witnessing impressive market traction, driving top-line growth.
During third-quarter 2016, FLIR Systems introduced thermal fire sensor, FLIR RSX-F and an airborne thermal imaging system, Star SAFIRE 380-HLDc. Other notable products unveiled during the third quarter include Surveillance segment’s gimball platform, Star SAFIRE 380-HLDc, Instruments segment’s IGM test and measurement product, DM284 and OEM & Emerging segment’s popular Vue series of thermal cameras. These products are anticipated to propel revenues for the third quarter.
This apart, FLIR Systems’ impressive government business and strategic acquisitions are also expected to drive third-quarter financials. The company has fortified its hold in the full-spectrum end-to-end security system domain post DVTEL buyout. Also, the acquisitions of sporting and tactical scopes firm – Armasight – and security hardware and software solutions provider – Innovative Security Designs – are estimated to boost the company’s top line for the quarter.
Despite these positives, volatile macroeconomic environment has been playing a major spoilsport for the company. Precipitous decline in client spending and capital investments over the past few quarters are likely to hurt the company’s financials for the quarter to be reported. During second-quarter 2016, delays in licensing processes for international customers have pushed approximately $20 million of revenues into the second half of the year. Persistent weakness may further affect revenues.
This apart, multiple factors including product mix changes, manufacturing cost absorption, adjustments in inventory and rise in competitive pressure in security retail channels are putting profits under pressure. Also, unfavorable product mix may prove to be a drag on the operating margin. Furthermore, as a major portion of FLIR Systems’ sales originates outside the U.S., the company remains vulnerable to currency fluctuations. In addition, strong competition, volatility of primary markets and vagaries of the spending by key clients are also likely to compound the company’s problems for the soon-to-be-reported quarter.
Earnings Whispers
Our proven model does not conclusively show that FLIR Systems will beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESPand a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below.
Zacks ESP: Earnings ESP for the company is currently 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 44 cents.
Zacks Rank: FLIR Systems’ Zacks Rank #3 when combined with 0.00% ESP makes surprise prediction difficult.
Note that we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
FLIR SYSTEMS Price and EPS Surprise
FLIR SYSTEMS Price and EPS Surprise | FLIR SYSTEMS Quote
Stocks to Consider
Here are some companies which you may consider, as our model shows that they have the right combination of elements to post an earnings beat this quarter:
Amazon.com, Inc. (AMZN - Free Report) with an Earnings ESP of +10.47% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Veeco Instruments Inc. (VECO - Free Report) with an Earnings ESP of +17.86% and Zacks Rank #1.
Armstrong World Industries, Inc. (AWI - Free Report) with an Earnings ESP of +1.32% and a Zacks Rank #2.
Confidential from Zacks
Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>