Roper's 1Q Earnings Beat

Roper Industries Inc. ( ROP - Snapshot Report ) reported first quarter 2013 non-GAAP earnings of $1.27 per share, up 16.5% from the year-ago quarter and ahead of the Zacks Consensus Estimate of $1.22.

Quarter Details

Roper’s non-GAAP total revenue (excluding a fair value adjustment to acquired deferred revenue) increased 4.2% year over year to $740.7 million in the quarter. The Zacks Consensus Estimate was pegged at $781.0 million.

On a GAAP basis, Roper reported revenues of $737.1 million, up 3.7% from the year-ago quarter. Acquisitions and divestitures accounted for 7.0% of the revenue growth in the quarter. Organic revenues declined 3.0% and the company reported a backlog of $1 billion.

Growth across most its business segments also contributed to the year-over-year increase in revenues. Revenues from Medical & Scientific Imaging and RF Technologies increased 23.1% and 2.1%, respectively. The strength in these segments more than offset the 2.0% decline in revenues from Energy Systems & Controls and a 6.6% drop in revenues from the Industrial Technology segment.

Non-GAAP gross profit increased 8.7% year over year to $425.2 million. Gross margin in the reported quarter increased to 57.4% from 55.0% in the year-ago quarter, primarily driven by better mix and higher volumes.

Non-GAAP income from operations increased 10.8% year over year to $188.8 million. The upside in operating income was based on improved sales. Operating margin improved from 24.0% to 25.5% on a year-over-year basis. Net earnings on a non-GAAP basis increased 17.5% from the year-ago quarter to $127.2 million.

Roper exited the quarter with $430.0 million in cash and cash equivalents and $1.92 billion of total debt (including the current portion) compared with $370.6 million in cash and cash equivalents and $2.02 billion of total debt (including the current portion) in the previous quarter. Roper reported free cash flow of $160.1 million at the end of the first quarter.

Guidance

Roper also increased its fiscal 2013 earnings outlook from $5.60-$5.82 to $5.76-$5.94 per share. Currently, the Zacks Consensus for fiscal 2013 earnings estimate is pegged at $5.75 per share.

Recommendation

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

However, macroeconomic concerns, integration issues due to acquisitions and competition from Agilent Technologies Inc. ( A - Analyst Report ) , Halliburton Company ( HAL - Analyst Report ) and IDEX Corp ( IEX - Snapshot Report ) are possible headwinds for the company.

Currently, Roper has a Zacks Rank #2 (Buy).