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Why Is Flir Systems (FLIR) Down 0.4% Since Last Earnings Report?

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It has been about a month since the last earnings report for Flir Systems (FLIR - Free Report) . Shares have lost about 0.4% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Flir Systems due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

FLIR Systems Q3 Earnings Meet Estimates, Improve Y/Y

FLIR Systems’ third-quarter 2018 adjusted earnings of 57 cents per share came in line with the Zacks Consensus Estimate. The reported figure increased 9.6% from the prior-year quarterly tally of 52 cents, courtesy of lower operating expenses.

Excluding the one-time items, the company reported GAAP earnings of 52 cents compared with 46 cents registered in the year-ago quarter.

Inside the Headlines

FLIR Systems’ revenues declined 6.4% year over year to $434.9 million. The top line also missed the Zacks Consensus Estimate of $446.2 million by 2.5%. Disappointing sales performance by the Commercial segment led to the overall top line deceleration.

Organic revenues increased 3.1% from the prior year quarter number, excluding revenues from acquisitions and the previously disclosed divested security businesses.

Segment-wise, revenues at the Industrial segment increased 3.6% year over year to $177.2 million. The improvement was primarily driven by increased sales of automotive, unmanned aerial systems (UAS) and optical gas imaging products. At the Government and Defense segment, revenues totaled $172 million, up 1.3% on a year-over-year basis. The uptick can be attributed to increased deliveries of gimbaled and UAS systems.

However, the Commercial segments’ revenues plunged 30.8% to $85.8 million from the year-ago period.

Adjusted operating income came in at $106 million compared with $101.1 million in the prior-year quarter, reflecting a growth of 4.8%. The company’s operating expenses decreased 1.7% year over year to $133.5 million.

Liquidity & Cash Flow

As of Sep 30, 2018, the company's cash and cash equivalents were $593.3 million compared with $519.1 million as of Dec 31, 2017. Long-term debt came in at $421.6 million, marginally up from $420.7 million on Dec 31, 2017.

Cash flow generated from operating activities in the quarter amounted to $122.5 million, up from $104.1 million in the prior-year period.

Outlook

FLIR Systems reiterated its guidance for 2018. The company continues to project adjusted earnings per share in the range of $2.17-$2.22 per share on revenues of $1.78-$1.80 billion.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

VGM Scores

Currently, Flir Systems has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. 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 this revision indicates a downward shift. Notably, Flir Systems has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.




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