FLIR Systems, Inc. (FLIR - Free Report) recently completed the acquisition of Acyclica, Inc., a Denver-based developer of software that provides cloud-based analytics. Post the buyout, Acyclica’s business operations will be part of FLIR Systems’ Intelligent Transportation Systems (ITS) division within its Commercial Business Unit. The acquirer anticipates this transaction to be neutral to its 2018 net earnings.
Rationale Behind the Deal
FLIR Systems’ ITS business division is revolutionizing traffic flows on roadways globally. Its unique, field-proven solutions help keep vehicles, pedestrians, and bicycles moving safely and smoothly. With the integration of Acyclica within its operational framework, FLIR systems can improve its thermal imaging and Wi-Fi tracking technologies to provide traffic engineers with a differentiated, highly reliable solution to detect vehicles, bicycles, and pedestrians in urban environments.
Meanwhile, as per a report by Markets and Markets research firm, the ITS market in roadways is projected to see a CAGR of 5.65% to $30.74 billion during 2018-2023. This growth can be attributed to the increasing concerns related to public safety, increasing traffic congestion and favorable government initiatives for effective traffic management. We believe the recent buyout by FLIR Systems has been driven by the company’s agenda to expand its footprint in the expanding ITS market.
Benefits of the Deal
FLIR Systems is a global leading manufacturer of sensor systems. The acquisition and integration of Acyclica within the company’s ITS business division adds a new sensing platform and a data analytics software element to its current portfolio of products and services. Such a strategic acquisition will enable FLIR Systems to provide complete and valuable traffic optimization solutions to its global transportation system customers and in turn, boost its revenue growth.
Apart from the ITS division, the recent acquisition is also expected to positively impact the company as Acyclica’s capabilities and expertise in data analytics and software platforms are scalable across other businesses of FLIR Systems.
Other Acquisitions by FLIR Systems
FLIR Systems follows a trend of pursuing notable mergers and acquisitions to enhance its product portfolio, apart from enhancing the value of the same. Evidently, in 2016, the company acquired Prox Dynamics, a leading manufacturer of nano-drone for covert surveillance applications, for $134 million. The buyout later helped FLIR Systems in leveraging Lepton’s capabilities, which is a high resolution micro thermal camera module. In the same year, the company acquired Point Grey Research for $259 million, thereby expanding its portfolio with Point Grey’s advanced visible imaging cameras and related software.
FLIR Systems’ stock has gained 54.8% in the last year compared with its industry’s growth of 26%. The outperformance may have been led by restructuring activities undertaken by the company to reap synergies and drive growth.
Zacks Rank & Other Stocks to Consider
FLIR Systems currently carries a Zacks Rank #2 (Buy).
A few other top-ranked stocks in the same sector are Aerojet Rocketdyne Holdings (AJRD - Free Report) , Engility Holdings and Huntington Ingalls Industries (HII - Free Report) .
While Aerojet Rocketdyne sports a Zacks Rank #1 (Strong Buy), Huntington Ingalls and Engility carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Aerojet Rocketdyne came up with an average positive earnings surprise of 9.27% in the last four quarters. The Zacks Consensus Estimate for 2018 earnings has risen 30.9% to $1.27 in the last 90 days.
Engility Holdings delivered an average positive earnings surprise of 19% in the last four quarters. The Zacks Consensus Estimate for 2018 earnings has moved up 16.1% to $2.02 in the last 90 days.
Huntington Ingalls pulled off an average positive earnings surprise of 9.48% for the trailing four quarters. The Zacks Consensus Estimate for 2018 earnings has moved 6.4% north to $17.24 in the last 90 days.
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