A month has gone by since the last earnings report for Fortive (FTV - Free Report) . Shares have added about 8% in that time frame, outperforming 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 Beats Q4 Earnings Estimates, Lags Revenues
Fortive Corporation reported fourth-quarter 2018 earnings of 91 cents per share, surpassing the Zacks Consensus Estimate of 86 cents. Moreover, the figure increased 10% from the year-ago quarter and 5% on a sequential basis.
Revenues also increased 11.4% year over year to $1.76 billion. However, the figure missed the Zacks Consensus Estimate by 0.14%.
The year-over-year revenue increase was driven by strong growth across sensingand transportation technologies, as well as Fluke and Industrial Scientific.
Core revenues grew 7.4% from the year-ago quarter, which can be primarily attributed to strong momentum across all its platforms.
The company closed the Gordian and Accruent buyouts during the year. In addition, it closed the divestiture of the automation and specialty businesses to Altra.
Top Line in Detail
Fortive operates under the following two organized segments.
Professional Instrumentation: The segment generated $1.0 billion revenues (56.9% of total fourth-quarter revenues), which increased 14% on a year-over-year basis. Core revenues contributed 5.2% to the total revenues. Acquisitions contributed 1,020 basis points (bps) to the top line, while unfavorable currency impacted top-line growth by 140 bps.
Industrial Technologies: This segment generated $757.2 million revenues (43.1% of the total revenues), which improved 8.1% from the prior-year quarter. Core revenues contributed 10.3% to the top line, while favorable exchange rate impacted top-line growth by 230 bps on a year-over-year basis.
In the fourth quarter, gross margin came in at 51.1%, which contracted 50 bps year over year.
Total operating expenses were $603.8 million, reflecting a18.7% year-over-year increase. As a percentage of revenues, selling, general &administrative (SG&A) expenses increased, while research & development expenses remained unchanged from a year ago.
Operating margin was 16.8%, which contracted 250 bps on a year-over-year basis. Segment wise, operating margin for Professional Instrumentation came in at 16.1%, which contracted 550 bps year over year.
Industrial Technologies operating margins came in at 20.5%, which expanded 110 bps from the year-ago quarter.
At the end of the fourth quarter, Fortive’s cash & cash equivalents, and marketable securities were around $1.18 billion.
For the first quarter of 2019, management expects adjusted net earnings in the range of 64-68 cents per share.
For 2019, Fortive expects adjusted net earnings in the range of $3.40-$3.50 per share.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -16.36% due to these changes.
At this time, Fortive has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. Following the exact same course, 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 D. If you aren't focused on one strategy, this score is the one you should be interested in.
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.