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Roper Industries Inc. (ROP - Snapshot Report) reported fourth quarter 2012 non-GAAP earnings of $1.48 per share, up 20.3% from the year-ago quarter and ahead of the Zacks Consensus Estimate by a couple of cents.

Revenues

Roper’s non-GAAP total revenue (excluding a fair value adjustment to acquired deferred revenue) increased 10.4% year over year to $815.9 million in the quarter. The Zacks Consensus Estimate was pegged at $816 million.

On a GAAP basis, Roper reported revenues of $809.9 million. Acquisitions accounted for 7% of the revenue growth in the quarter, while 3.0% came from organic growth.

Growth across most its business segments also contributed to the year-over-year increase in revenues. Revenues from Energy Systems & Controls and Medical & Scientific Imaging increased 7.3% and 37.9%, respectively. The strength in these segments more than offset the 0.8% decline in Industrial Technology revenue and 0.1% dip in RF Technology revenue.

Margins

Non-GAAP gross profit increased 16.4% year over year to $472.3 million. Gross margin in the reported quarter increased to 57.9% from 54.9% in the year-ago quarter, driven by better mix and higher volumes.

Non-GAAP income from operations increased 23.4% year over year to $231.2 million. The upside in operating income was based on improved sales. Operating margin improved from 25.4% to 28.3% on a year-over-year basis. Net earnings on a non-GAAP basis increased 21.1% from the year-ago quarter to $147.4 million.

Balance Sheet

Roper exited the quarter with $370.6 million in cash and cash equivalents and $2.02 billion of total debt (including the current portion) compared with $355.1 million in cash and cash equivalents and $2.10 billion of total debt (including the current portion) in the previous quarter.

Guidance

Roper expects earnings per share in the range of $1.19-$1.23 (well below the Zacks Consensus Estimate of $1.28) for the first quarter of 2013 while fiscal 2013 earnings per share are guided between $5.60 and $5.82 (better than the Zacks Consensus Estimate of $5.65).

Recommendation

We believe that a strong backlog and improvement across segments coupled with strong organic growth will likely drive revenues going forward. Moreover, the acquisitions are expected to benefit the company in the long run. However, competition from Agilent Technologies Inc. (A - Analyst Report), Halliburton Company (HAL - Analyst Report) and IDEX Corp (IEX - Analyst Report) are the near-term headwinds.

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

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