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Fortive (FTV) Up 8.8% Since Earnings Report: Can It Continue?
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A month has gone by since the last earnings report for Fortive Corporation (FTV - Free Report) . Shares have added about 8.8% in that time frame.
Will the recent positive trend continue leading up to its next earnings release, or is FTV due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Fortive Corporation reported fourth-quarter 2017 earnings of 82 cents per share that beat the Zacks Consensus Estimate by four cents. The figure increased almost 21% from the year-ago quarter and was better than management’s guidance of 74-78 cents.
Revenues increased 11% year over year to $1.81 billion, slightly better than the Zacks Consensus Estimate of $1.76 billion. Acquisitions contributed 5.9% to this growth, while favorable foreign exchange added 2.1%.
Geographically, core revenues grew mid single-digits across Asia and Latin America, which are high-growth markets for Fortive. Double-digit growth in China was led by business wins at Gilbarco Veeder-Root, Kollmorgen, Fluke and sensing technologies.
Core revenues in developed markets grew low-single digits driven by continued strength in Western Europe and improved performance by Tektronix in North America, new product innovations, strong commercial execution through the Fortive business system and an improved industrial economy.
Top-line Details
Professional Instrumentation revenues grew 17.5%, with acquisitions contributing 9.6% and favorable foreign exchange adding 2.3%.
Advanced Instrumentation & Solutions core revenues increased mid-single digits, led by market share gains at Fluke and Tektronix.
Field Solutions core revenues were up mid-single digits, driven by growth in both developed and high-growth markets. Also, Fluke posted high single-digit growth.
Sensing Technologies platform delivered high-single digit core revenues growth, driven by double-digit growth in high-growth markets.
Industrial Technologies revenues increased 5.6%, with acquisitions contributing 2.7%.
Transportation Technologies platform posted low single-digit core revenues growth, reflecting mid-single digit growth at Telematics, offset by mid single digit decline in Gilbarco Veeder-Root.
Telematics posted core revenues growth of mid single-digits driven by strong SaaS sales growth, increased installed base growth and improved performance in North America.
The company improved its mobile lead generation conversion rate by greater than 80% and reduced its ELD campaign cost per click by greater than 30%.
Automation and specialty core sales grew high single-digits driven by continued double-digit growth in high-growth markets and robotics. Jacobs Vehicle Systems delivered mid-teens core revenues growth driven by increased Class A truck production in the United States.
Kollmorgen posted high-single digit core revenues growth, reflecting strong demand across its industrial automation product line. Moreover, Thompson delivered mid single-digit core revenues growth driven by double-digit growth in China, Western Europe and industrial linear actuary sales.
Operating Details
Gross margin expanded 140 basis points (bps) to 50.4%.
Total operating expenses were $554.2 million, reflecting an increase of 20.8% year over year. As a percentage of revenues, selling, general & administrative (SG&A) expenses increased, while research & development expenses decreased.
As a result, adjusted operating margin decreased 110 bps to 19.7%. Segment wise, Professional Instrumentation and Industrial Technologies operating margins contracted 160 and 40 bps, respectively.
Cash Flow
Exiting the fourth quarter, cash and cash equivalents were $2.1 billion, and inventories were $580.6 million. Free cash flow was $450.0 million in the fourth quarter.
Guidance
For first-quarter 2018, management expects adjusted net earnings in the range of 72-76 cents per share.
For 2018, Fortive expects adjusted net earnings in the range of $3.35-$3.45 per share.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates. There have been four revisions higher for the current quarter. In the past month, the consensus estimate has shifted by 7.8% due to these changes.
VGM Scores
At this time, FTV has an average Growth Score of C, however its momentum is doing a bit better with a B. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate that the stock is more suitable for momentum investors than growth investors.
Outlook
Estimates have been trending upward for the stock and the magnitude of these revisions looks promising. It comes with little surprise FTV has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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Fortive (FTV) Up 8.8% Since Earnings Report: Can It Continue?
A month has gone by since the last earnings report for Fortive Corporation (FTV - Free Report) . Shares have added about 8.8% in that time frame.
Will the recent positive trend continue leading up to its next earnings release, or is FTV due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Fortive Beats Q4 Earnings & Revenues, Issues 2018 View
Fortive Corporation reported fourth-quarter 2017 earnings of 82 cents per share that beat the Zacks Consensus Estimate by four cents. The figure increased almost 21% from the year-ago quarter and was better than management’s guidance of 74-78 cents.
Revenues increased 11% year over year to $1.81 billion, slightly better than the Zacks Consensus Estimate of $1.76 billion. Acquisitions contributed 5.9% to this growth, while favorable foreign exchange added 2.1%.
Geographically, core revenues grew mid single-digits across Asia and Latin America, which are high-growth markets for Fortive. Double-digit growth in China was led by business wins at Gilbarco Veeder-Root, Kollmorgen, Fluke and sensing technologies.
Core revenues in developed markets grew low-single digits driven by continued strength in Western Europe and improved performance by Tektronix in North America, new product innovations, strong commercial execution through the Fortive business system and an improved industrial economy.
Top-line Details
Professional Instrumentation revenues grew 17.5%, with acquisitions contributing 9.6% and favorable foreign exchange adding 2.3%.
Advanced Instrumentation & Solutions core revenues increased mid-single digits, led by market share gains at Fluke and Tektronix.
Field Solutions core revenues were up mid-single digits, driven by growth in both developed and high-growth markets. Also, Fluke posted high single-digit growth.
Sensing Technologies platform delivered high-single digit core revenues growth, driven by double-digit growth in high-growth markets.
Industrial Technologies revenues increased 5.6%, with acquisitions contributing 2.7%.
Transportation Technologies platform posted low single-digit core revenues growth, reflecting mid-single digit growth at Telematics, offset by mid single digit decline in Gilbarco Veeder-Root.
Telematics posted core revenues growth of mid single-digits driven by strong SaaS sales growth, increased installed base growth and improved performance in North America.
The company improved its mobile lead generation conversion rate by greater than 80% and reduced its ELD campaign cost per click by greater than 30%.
Automation and specialty core sales grew high single-digits driven by continued double-digit growth in high-growth markets and robotics. Jacobs Vehicle Systems delivered mid-teens core revenues growth driven by increased Class A truck production in the United States.
Kollmorgen posted high-single digit core revenues growth, reflecting strong demand across its industrial automation product line. Moreover, Thompson delivered mid single-digit core revenues growth driven by double-digit growth in China, Western Europe and industrial linear actuary sales.
Operating Details
Gross margin expanded 140 basis points (bps) to 50.4%.
Total operating expenses were $554.2 million, reflecting an increase of 20.8% year over year. As a percentage of revenues, selling, general & administrative (SG&A) expenses increased, while research & development expenses decreased.
As a result, adjusted operating margin decreased 110 bps to 19.7%. Segment wise, Professional Instrumentation and Industrial Technologies operating margins contracted 160 and 40 bps, respectively.
Cash Flow
Exiting the fourth quarter, cash and cash equivalents were $2.1 billion, and inventories were $580.6 million. Free cash flow was $450.0 million in the fourth quarter.
Guidance
For first-quarter 2018, management expects adjusted net earnings in the range of 72-76 cents per share.
For 2018, Fortive expects adjusted net earnings in the range of $3.35-$3.45 per share.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates. There have been four revisions higher for the current quarter. In the past month, the consensus estimate has shifted by 7.8% due to these changes.
VGM Scores
At this time, FTV has an average Growth Score of C, however its momentum is doing a bit better with a B. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate that the stock is more suitable for momentum investors than growth investors.
Outlook
Estimates have been trending upward for the stock and the magnitude of these revisions looks promising. It comes with little surprise FTV has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.