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Roper (ROP) Up 16% in 6 Months: Will the Uptrend Continue?
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Shares of Roper Technologies (ROP - Free Report) have gained 16.5% in the past six months, outperforming the industry’s 15.6% increase. The upside can be linked primarily to strength in the Application Software segment and benefits from the acquisition of Frontline Education.
Image Source: Zacks Investment Research
What’s Driving the Stock?
Roper’s Application Software segment is benefiting from strength across its Deltek, Vertafore and Aderant businesses. Robust SaaS offerings and high retention rates are aiding Deltek. The acquisition of Replicon, expected to be completed in the third quarter of 2023, will bolster Deltek’s growth by boosting its SaaS solutions portfolio. The buyout is expected to contribute $70 million to revenues and $24 million to EBITDA in 2024.
Record bookings and growing adoption and cross-selling of SaaS solutions are key catalysts to Aderant’s growth. The MGA systems acquisition and strength across the Clinisys, Data Innovations and Strata businesses are fueling growth of Vertafore. Roper expects organic revenues to increase in mid-single digits for the Application Software segment in the second half of 2023.
The Network Software and Technology Enabled Products segments are also holding up well. Strong retention and customer expansion activity and strength across the Foundry business are fostering growth of the Network Software segment. The company expects mid-single-digit organic revenue growth for the segment in the second half of 2023.
Improving supply chains and solid performance of Neptune business due to increased demand for residential and commercial ultrasonic or static meters are fostering growth of the Tech-enabled Products segment. Solid performance of Verathon due to strength across reoccurring single-use products and bladder scan capital purchases bodes well for the segment. ROP expects high-single-digit organic growth for the segment in the second half of 2023.
Roper’s bullish guidance for 2023 bears testimony to the strength across its businesses. For 2023, the company expects total revenues to increase around 13% year over year. Organic revenues are estimated to increase 7%. Adjusted earnings are predicted to be $16.36-$16.50 per share compared with $16.10-$16.30 expected earlier.
Roper aims to expand its operations through strategic acquisitions. In August, the company acquired cloud-based performance management and data solutions provider, Syntellis Performance Solutions, for $1.25 billion. The buyout expands the company’s Strata Decision Technology business, which is part of the Application Software segment.
In October 2022, Roper acquired Frontline Education for $3.7 billion. The acquisition builds on ROP’s Horizon software business (which it acquired in 2008), expanding its presence in the K-12 education market. Acquisitions boosted sales by 8% in the second quarter.
Roper’s consistent efforts to reward shareholders through dividends are also expected to have boosted its shares. In the first six months of 2023, ROP rewarded its shareholders with a dividend payment of $144.8 million, up 10.8% year over year. Strong cash flow generation capacity supports the company’s shareholder-friendly activities. In the second quarter of 2023, the company generated free cash flow of $295 million, up 17% year over year.
Will the Uptrend Last?
With strong market conditions, Roper anticipates continued strength across its businesses. Improving supply chains and synergies from acquisitions are expected to boost the company’s performance. ROP expects Frontline Education to contribute approximately $370 million to its revenues and $175 million to its EBITDA in 2023. The company expects Syntellis to contribute approximately $185 million and $85 million to its revenues and EBITDA in 2024, respectively.
Zacks Rank & Other Stocks to Consider
Roper presently carries a Zacks Rank #2 (Buy).
Some other top-ranked stocks within the broader Computer and Technology sector are as follows:
Image: Bigstock
Roper (ROP) Up 16% in 6 Months: Will the Uptrend Continue?
Shares of Roper Technologies (ROP - Free Report) have gained 16.5% in the past six months, outperforming the industry’s 15.6% increase. The upside can be linked primarily to strength in the Application Software segment and benefits from the acquisition of Frontline Education.
Image Source: Zacks Investment Research
What’s Driving the Stock?
Roper’s Application Software segment is benefiting from strength across its Deltek, Vertafore and Aderant businesses. Robust SaaS offerings and high retention rates are aiding Deltek. The acquisition of Replicon, expected to be completed in the third quarter of 2023, will bolster Deltek’s growth by boosting its SaaS solutions portfolio. The buyout is expected to contribute $70 million to revenues and $24 million to EBITDA in 2024.
Record bookings and growing adoption and cross-selling of SaaS solutions are key catalysts to Aderant’s growth. The MGA systems acquisition and strength across the Clinisys, Data Innovations and Strata businesses are fueling growth of Vertafore. Roper expects organic revenues to increase in mid-single digits for the Application Software segment in the second half of 2023.
The Network Software and Technology Enabled Products segments are also holding up well. Strong retention and customer expansion activity and strength across the Foundry business are fostering growth of the Network Software segment. The company expects mid-single-digit organic revenue growth for the segment in the second half of 2023.
Improving supply chains and solid performance of Neptune business due to increased demand for residential and commercial ultrasonic or static meters are fostering growth of the Tech-enabled Products segment. Solid performance of Verathon due to strength across reoccurring single-use products and bladder scan capital purchases bodes well for the segment. ROP expects high-single-digit organic growth for the segment in the second half of 2023.
Roper’s bullish guidance for 2023 bears testimony to the strength across its businesses. For 2023, the company expects total revenues to increase around 13% year over year. Organic revenues are estimated to increase 7%. Adjusted earnings are predicted to be $16.36-$16.50 per share compared with $16.10-$16.30 expected earlier.
Roper aims to expand its operations through strategic acquisitions. In August, the company acquired cloud-based performance management and data solutions provider, Syntellis Performance Solutions, for $1.25 billion. The buyout expands the company’s Strata Decision Technology business, which is part of the Application Software segment.
In October 2022, Roper acquired Frontline Education for $3.7 billion. The acquisition builds on ROP’s Horizon software business (which it acquired in 2008), expanding its presence in the K-12 education market. Acquisitions boosted sales by 8% in the second quarter.
Roper’s consistent efforts to reward shareholders through dividends are also expected to have boosted its shares. In the first six months of 2023, ROP rewarded its shareholders with a dividend payment of $144.8 million, up 10.8% year over year. Strong cash flow generation capacity supports the company’s shareholder-friendly activities. In the second quarter of 2023, the company generated free cash flow of $295 million, up 17% year over year.
Will the Uptrend Last?
With strong market conditions, Roper anticipates continued strength across its businesses. Improving supply chains and synergies from acquisitions are expected to boost the company’s performance. ROP expects Frontline Education to contribute approximately $370 million to its revenues and $175 million to its EBITDA in 2023. The company expects Syntellis to contribute approximately $185 million and $85 million to its revenues and EBITDA in 2024, respectively.
Zacks Rank & Other Stocks to Consider
Roper presently carries a Zacks Rank #2 (Buy).
Some other top-ranked stocks within the broader Computer and Technology sector are as follows:
Vertiv (VRT - Free Report) currently sports a Zacks Rank #1 (Strong Buy). The company pulled off a trailing four-quarter earnings surprise of 25.7%, on average. You can see the complete list of today’s Zacks #1 Rank stocks.
Vertiv has an estimated earnings growth rate of 200% for the current year. The stock has rallied more than 100% in the past six months.
Wix.com (WIX - Free Report) presently flaunts a Zacks Rank #1. The company delivered a trailing four-quarter earnings surprise of 319.3%, on average.
Wix.com has an estimated earnings growth rate of 2070.6% for the current year. The stock has gained 4.2% in the past six months.