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Will FLIR Systems (FLIR) Disappoint Again in Q1 Earnings?

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FLIR Systems Inc. (FLIR - Free Report) is slated to report first-quarter 2017 results, before the opening bell on Apr 26.

The last reported quarter marked the company’s seventh back-to-back earnings miss as it posted a negative surprise of 5.5%. Consequently, FLIR Systems has an average negative surprise of 4.2% over the trailing four quarters.

Let's see how things are shaping up for this announcement.

Factors to Consider

FLIR Systems’ well-diversified business portfolio, in terms of geographies, products and markets, proved to be a major catalyst in recent times. In addition, the company’s business streamlining efforts, which have been undertaken for half a decade now, bolstered its growth. In the past few quarters, key metrics like revenue, operating income, operating margin and adjusted EPS have materially benefitted from such actions. The  trend is likely to continue for the soon-to-be-reported quarter.

Moreover, the company’s strategic product launches, to expand its customer base and foothold in new markets, are likely to supplement the first-quarter top line performance. During the to-be-reported quarter, FLIR Systems introduced three new Exx-Series advanced thermal imaging cameras and improved its M-Series marine thermal cameras.

We believe that market traction of these and other popular offerings, such as Helios, Prometheus Q14 thermal imagers and Griffin G465 mobile gas mass spectrometer, will drive the first-quarter 2017 sales. Moreover, FLIR Systems’ previously completed buyouts, namely, DVTEL and Armasight, are also likely to supplement the company’s commercial product revenues. The company’s CDMQ model is also expected to act as a growth driver for the government business.  

Despite these positives, litanies of factors—including product mix changes, manufacturing cost absorption, adjustments in inventory and rise in competitive pressure in security retail channels—are likely to dampen margins. Also, higher expenditure in fixing the faulty units of its SkyWatch surveillance towers is likely to hurt margins. 

Moreover, increasing competition in its retail channels and escalating operating expenses in the Security segment can also play spoilsport for the upcoming results. In addition, depressed client spending and sluggish macroeconomic environment are most likely to weigh down on the company’s financials. Increased budget uncertainty, particularly in the U.S. under the new Trump administration, poses a significant risk.

Earnings Whisper

Our proven model does not conclusively show that FLIR Systems will beat earnings estimates in this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. But that is not the case here as you will see below.

Zacks ESP: Earnings ESP for the company is currently pegged at 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 36 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

FLIR Systems, Inc. Price and EPS Surprise


FLIR Systems, Inc. Price and EPS Surprise | FLIR Systems, Inc. Quote

Zacks Rank: FLIR Systems has a Zacks Rank #3. Though Zacks Rank #1, 2 and 3 increase the predictive power of the ESP, the company’s ESP of 0.00% makes surprise prediction difficult.

Note that we caution against Sell-rated stocks (Zacks Rank #4 or 5) going into an earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks That Warrant a Look

Here are some companies that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter:

Leidos Holdings, Inc. (LDOS - Free Report) has an Earnings ESP of +1.28% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Lockheed Martin Corp. (LMT - Free Report) has an Earnings ESP of +2.90% and a Zacks Rank #2.

Littelfuse, Inc. (LFUS - Free Report) has an Earnings ESP of +1.83% and carries a Zacks Rank #2.

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