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Fortive (FTV) Up 4.2% Since Last Earnings Report: Can It Continue?
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A month has gone by since the last earnings report for Fortive (FTV - Free Report) . Shares have added about 4.2% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Fortive 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 catalysts.
Fortive Q3 Earnings Miss Estimates
Fortive reported third-quarter 2023 adjusted earnings of 85 cents per share, missing the Zacks Consensus Estimate by 1.2%. However, the bottom line increased 8% year over year.
Revenues rose 2.6% year over year to $1.495 billion but missed the Zacks Consensus Estimate by 1.4%. Core revenues also moved up 2.5% from the year-ago levels. Nonetheless, core growth was affected by specific headwinds in the healthcare vertical.
The year-over-year improvement in the top line was driven by continued momentum in software and services businesses amid a challenging macroeconomic environment.
However, the company tempered guidance for 2023. Management now projects adjusted net earnings to be between $3.37 per share and $3.40 per share (earlier view: $3.36-$3.42). The Zacks Consensus Estimate is pegged at $3.43.
Revenues are now anticipated to be between $6 billion and $6.1 billion (earlier view: $6.070-$6.1 billion). The Zacks Consensus Estimate is pegged at $6.1 billion. Free cash flow is forecast to be $1.250 billion.
Owing to uncertain economic recovery in China and delayed revival in Invetech, FTV has also adjusted its outlook for the fourth quarter. Core revenue growth is suggested to be between 1.5% and 3%
For fourth-quarter 2023, management now estimates adjusted net earnings in the range of 92-95 cents per share compared with the earlier guided range of 94-97 cents.
Revenues are now envisioned in the $1.555-$1.575 billion band (earlier expectations were in the range of $1.580-$1.595 billion).
Top Line in Detail
Fortive operates under the following three organized segments.
Intelligent Operating Solutions: The segment generated revenues of $644 million (contributing 43.1% to total revenues), up 5% on a year-over-year basis.
Precision Technologies: Segmental revenues totaled $531 million (35.5%), up 1.3% from the prior-year levels.
Advanced Healthcare Solutions: This segment registered revenues of $320 million (21.4%), up 0.3% from a year ago.
Operating Details
In the quarter under review, adjusted gross margin reached 59.7%, which expanded 160 basis points (bps) year over year.
Total operating costs (selling, general and administrative expenses, and research and development expenditures) were $601.9 million, up 1.4% year over year.
Adjusted operating margin was 25.9%, extending 150 bps on a year-over-year basis.
Segment-wise, adjusted operating margins of Intelligent Operating Solutions and Precision Technologies were 32% and 26.5%, rising 230 bps and 60 bps, respectively, year over year.
As of Sep 29, cash and cash equivalents were $714.1 million compared with $712.8 million as of Jun 30.
As of Sep 29, accounts receivables were $925.4 million compared with $935.2 million as of Jun 30.
FTV generated operating cash flow of $411.4 million compared with $329.8 million in the previous-year quarter.
Non-GAAP free cash flow was $383.5 million compared with $307.3 million in the prior-year quarter.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended downward during the past month.
VGM Scores
At this time, Fortive has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Fortive has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Fortive (FTV) Up 4.2% Since Last Earnings Report: Can It Continue?
A month has gone by since the last earnings report for Fortive (FTV - Free Report) . Shares have added about 4.2% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Fortive 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 catalysts.
Fortive Q3 Earnings Miss Estimates
Fortive reported third-quarter 2023 adjusted earnings of 85 cents per share, missing the Zacks Consensus Estimate by 1.2%. However, the bottom line increased 8% year over year.
Revenues rose 2.6% year over year to $1.495 billion but missed the Zacks Consensus Estimate by 1.4%. Core revenues also moved up 2.5% from the year-ago levels. Nonetheless, core growth was affected by specific headwinds in the healthcare vertical.
The year-over-year improvement in the top line was driven by continued momentum in software and services businesses amid a challenging macroeconomic environment.
However, the company tempered guidance for 2023. Management now projects adjusted net earnings to be between $3.37 per share and $3.40 per share (earlier view: $3.36-$3.42). The Zacks Consensus Estimate is pegged at $3.43.
Revenues are now anticipated to be between $6 billion and $6.1 billion (earlier view: $6.070-$6.1 billion). The Zacks Consensus Estimate is pegged at $6.1 billion. Free cash flow is forecast to be $1.250 billion.
Owing to uncertain economic recovery in China and delayed revival in Invetech, FTV has also adjusted its outlook for the fourth quarter. Core revenue growth is suggested to be between 1.5% and 3%
For fourth-quarter 2023, management now estimates adjusted net earnings in the range of 92-95 cents per share compared with the earlier guided range of 94-97 cents.
Revenues are now envisioned in the $1.555-$1.575 billion band (earlier expectations were in the range of $1.580-$1.595 billion).
Top Line in Detail
Fortive operates under the following three organized segments.
Intelligent Operating Solutions: The segment generated revenues of $644 million (contributing 43.1% to total revenues), up 5% on a year-over-year basis.
Precision Technologies: Segmental revenues totaled $531 million (35.5%), up 1.3% from the prior-year levels.
Advanced Healthcare Solutions: This segment registered revenues of $320 million (21.4%), up 0.3% from a year ago.
Operating Details
In the quarter under review, adjusted gross margin reached 59.7%, which expanded 160 basis points (bps) year over year.
Total operating costs (selling, general and administrative expenses, and research and development expenditures) were $601.9 million, up 1.4% year over year.
Adjusted operating margin was 25.9%, extending 150 bps on a year-over-year basis.
Segment-wise, adjusted operating margins of Intelligent Operating Solutions and Precision Technologies were 32% and 26.5%, rising 230 bps and 60 bps, respectively, year over year.
Advanced Healthcare Solutions’ adjusted operating margin of 22.5% improved 200 bps.
Balance Sheet & Cash Flow
As of Sep 29, cash and cash equivalents were $714.1 million compared with $712.8 million as of Jun 30.
As of Sep 29, accounts receivables were $925.4 million compared with $935.2 million as of Jun 30.
FTV generated operating cash flow of $411.4 million compared with $329.8 million in the previous-year quarter.
Non-GAAP free cash flow was $383.5 million compared with $307.3 million in the prior-year quarter.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended downward during the past month.
VGM Scores
At this time, Fortive has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Fortive has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.