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FLIR Systems (FLIR) Q1 Earnings & Revenues Surpass Estimates

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FLIR Systems Inc.’s (FLIR - Free Report) first-quarter 2018 adjusted earnings per share came in at 48 cents, surpassing the Zacks Consensus Estimate of 43 cents. The reported figure also increased 33.3% from the prior-year quarter figure owing to solid top-line growth.

Adjusted net income came in at $68.2 million compared with $49.6 million in the year-ago quarter. The year-over-year improvement can primarily be attributed to the company’s solid top-line performance.

Inside the Headlines

FLIR Systems’ revenues grew 8.1% year over year to $439.6 million. The top line also outpaced the Zacks Consensus Estimate of $397.5 million. Strong growth across the company’s two of the three segments drove the overall top line.

FLIR Systems, Inc. Price, Consensus and EPS Surprise

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

 

Segment-wise, revenues at the Industrial segment increased 10.3% year over year to $170.7 million. The improvement was driven by higher handheld thermal imager and camera core sales. At the Government and Defense segment revenues came in at $159.3 million, up 15.3% on a year-over-year basis. The uptick can be attributed to international deliveries. However, the Commercial segments’ revenues declined 3.7% to $109.6 million from the year-ago quarter.

Adjusted operating income came in at $87.8 million compared with $69.6 million in the prior-year quarter. Healthy top-line improvement led to the rise in income.

Liquidity & Cash Flow

As of Mar 31, 2018, the company's cash and cash equivalents were $452.1 million compared with $519.1 million as of Dec 31, 2017. Long-term debt was $421 million, marginally up from $420.7 million at Dec 31, 2017.

Cash flow generated from operating activities in the quarter came in at $43.2 million, down from $75.1 million in the prior-year quarter.

Outlook

Concurrent with the first-quarter earnings release, FLIR Systems revised its guidance for 2018. The company now projects adjusted earnings per share in the range of $2.11-$2.16 compared with its prior guidance of $2.05-$2.10. In addition, it expects revenues in the range of $1.76-$1.79 billion compared with $1.73-$1.76 billion projected earlier.

Our Take

FLIR Systems has realigned six of its segments namely, OEM & Emerging Markets, Surveillance, Instruments, Security, Detection and Maritime into three units. The new segments are called Government & Defense, Industrial, and Commercial. Streamlining the operations is anticipated to augment the company’s agility, drive solid improvements in backlog, operating margin, net income, earnings per share as well as enhance management focus. We believe that FLIR Systems’ strategic restructuring activities and solid backlog levels should help it sail through difficult economic times and drive growth.

However, the company’s gross margins remain vulnerable to a host of factors, including product mix changes and manufacturing cost absorption.

FLIR Systems carries a Zacks Rank #3 (Hold).

Stocks to Consider

Some better-ranked stocks in the same space are Rockwell Collins, Inc. (COL - Free Report) , Curtiss-Wright Corporation (CW - Free Report) and Northrop Grumman Corporation (NOC - Free Report) . All these three stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.  

Rockwell Collins has a decent earnings surprise history. The company surpassed estimates thrice in the trailing four quarters, with an average beat of 2.5%.

Curtiss-Wright has an impressive earnings surprise history. The company exceeded estimates in the trailing four quarters, with an average beat of 15.1%.

Northrop Grumman has an impressive earnings surprise history. The company outpaced estimates in the trailing four quarters, with an average beat of 16.2%.

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