Earnings Preview: FLIR Systems

FLIR Systems Inc. (FLIR - Analyst Report) is slated to release its fourth-quarter 2011 earnings result on Friday, February 10, 2012. The current Zacks Consensus Estimate for fourth-quarter earnings per share (EPS) is 45 cents, representing annualized growth of 4.44%. For full-year 2011, the Zacks Consensus Estimate is $1.53, representing an annualized decline of 1.99%.

FLIR System’s earnings were above the Zacks Consensus Estimate in the last quarter while below the estimates in the first and second quarters of 2011 as well as in the fourth quarter of 2010. The company’s average positive earnings surprise for the trailing four quarters was 0.65%.

Third Quarter Highlights

FLIR Systems reported third-quarter 2011 earnings per share from continuing operations of 40 cents, above the Zacks Consensus Estimate of 37 cents and prior-year earnings of 39 cents. Earnings in the quarter were affected by net after tax impact of the severance cost, excluding which earnings per share in the quarter came in at 43 cents

Total revenue was $371.3 million, an increase of 12% year over year. FLIR’s revenue increased in both its division, adding to total revenue growth. Total backlog at the end of September 30, 2011 was about $546 million, up $60 million during the quarter.

Commercial Systems division was $196.4 million, up 16% year over year. Government Systems division was $174.9 million in the quarter, up 7% year over year.

Agreement of Estimate Revisions  

In the last 30 days, of the analysts providing estimates on the stock, none changed their estimate for the fourth quarter, first-quarter 2012 or full-year 2011 and 2012.

Magnitude of Estimate Revisions  

In the last 7 days, there was no change in earnings estimate for the fourth quarter, first-quarter 2012, full-year 2011 or 2012. In the last 30 days also, the estimates remained unchanged, except for full-year 2012, for which the estimate decreased from $1.69 cents to $1.68.                          

Our Take  

FLIR Systems is witnessing increased interest for its solutions across many governments and agencies. The company’s competitive advantage lies in its ability to provide highly capable and rapidly obtainable products with prices and customer service that are better than its competitors.

Though the company’s TVM segment sales increased by 10% year over year in the third quarter, it was affected by a drop in sales of security products. Dollars booked from security products declined 20%, driven by orders of uncooled cameras.

The company witnessed a drop in sales for cooled cameras due to an international board of security order received in the third quarter of 2010. For 2011, the company decreased its revenue guidance in the range of $1.55 billion to $1.6 billion from its prior guidance of $1.6 billion to $1.65 billion.

FLIR Systems Inc. is a leader in design, manufacture and marketing of thermal imaging systems. Its products are used in a wide variety of applications in commercial, industrial and government markets, internationally as well as domestically. It offers a wide variety of system configurations to suit specific customer requirements. The company’s business is organized into three divisions: Government Systems, Commercial Vision Systems and Thermography Products.

We continue to maintain a Neutral rating on FLIR System for the long term. The company has a Zacks #3 Rank (Hold recommendation) over the next one-to-three months.

Read the full analyst report on FLIR