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Fortive Corporation (FTV - Free Report) reported first-quarter 2019 earnings of 69 cents per share, surpassing the Zacks Consensus Estimate by a penny. However, the figure decreased 11.5% from the year-ago quarter and 24.2% on a sequential basis.
Revenues increased 6.7% year over year to $1.6 billion. Core revenues grew 3.7% from the year-ago quarter. However, the top line missed the Zacks Consensus Estimate of $1.59 billion.
The year-over-year revenue increase was driven by strong growth across sensing and transportation technologies.
However, the company faced some near-term headwinds in the Professional Instrumentation segment.
On Apr 1, Fortive completed the acquisition of Advanced Sterilization Products (“ASP”) from Johnson & Johnson’s (JNJ) subsidiary, Ethicon, Inc., for approximately $2.7 billion. The deal allows the company to foray into the rapidly growing infection control market. Per data from Markets and Markets, the said market is expected to witness a CAGR of 6.5% between 2017 and 2022, and reach 21.06 billion by 2022 from $15.35 billion in 2017.
Notably, shares of Fortive have returned 23.1% in the past year compared with its industry’s 12.5% rally.
Top Line in Detail
Fortive operates under the following two organized segments.
Professional Instrumentation: The segment generated revenues of $947.3 million (59.5% of total first-quarter revenues), which increased 8.7% on a year-over-year basis.
Industrial Technologies: This segment generated revenues of $645.6 million (40.5% of the total revenues), which improved 4% from the prior-year quarter.
Operating Details
In the first quarter, gross margin came in at 51%, which contracted 40 basis points (bps) year over year.
Total operating expenses were $595.4 million, reflecting a 21.9% year-over-year increase. As a percentage of revenues, both selling, general & administrative (SG&A) as well as research & development expenses increased from the year-ago quarter.
Operating margin was 13.6%, which contracted 500 bps on a year-over-year basis.
Segment wise, operating margin for Professional Instrumentation came in at 14.4%, which contracted 930 bps year over year.
Industrial Technologies operating margins came in at 16.3%, which expanded 110 bps from the year-ago quarter.
Balance Sheet
During the quarter, the company generated free cash flow growth of 31%.
Guidance
For second-quarter 2019, management expects adjusted net earnings in the range of 86-90 cents per share. The corresponding Zacks Consensus Estimate for the quarter is pegged at 93 cents per share.
For 2019, Fortive expects adjusted net earnings in the range of $3.55-$3.65 per share, including $0.20 from the Advanced Sterilization Products business. The Zacks Consensus Estimate for the same is pegged at $3.58 per share.
Fortive Corporation Price, Consensus and EPS Surprise
Long-term earnings growth for Amazon, Ctrip.com and Square is currently projected at 31.2%, 23% and 25%, respectively.
Zacks' Top 10 Stocks for 2019
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-holds for the year?
Who wouldn't? Our annual Top 10s have beaten the market with amazing regularity. In 2018, while the market dropped -5.2%, the portfolio scored well into double-digits overall with individual stocks rising as high as +61.5%. And from 2012-2017, while the market boomed +126.3, Zacks' Top 10s reached an even more sensational +181.9%.
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Fortive (FTV) Beats Q1 Earnings Estimates, Lags Revenues
Fortive Corporation (FTV - Free Report) reported first-quarter 2019 earnings of 69 cents per share, surpassing the Zacks Consensus Estimate by a penny. However, the figure decreased 11.5% from the year-ago quarter and 24.2% on a sequential basis.
Revenues increased 6.7% year over year to $1.6 billion. Core revenues grew 3.7% from the year-ago quarter. However, the top line missed the Zacks Consensus Estimate of $1.59 billion.
The year-over-year revenue increase was driven by strong growth across sensing and transportation technologies.
However, the company faced some near-term headwinds in the Professional Instrumentation segment.
On Apr 1, Fortive completed the acquisition of Advanced Sterilization Products (“ASP”) from Johnson & Johnson’s (JNJ) subsidiary, Ethicon, Inc., for approximately $2.7 billion. The deal allows the company to foray into the rapidly growing infection control market. Per data from Markets and Markets, the said market is expected to witness a CAGR of 6.5% between 2017 and 2022, and reach 21.06 billion by 2022 from $15.35 billion in 2017.
Notably, shares of Fortive have returned 23.1% in the past year compared with its industry’s 12.5% rally.
Top Line in Detail
Fortive operates under the following two organized segments.
Professional Instrumentation: The segment generated revenues of $947.3 million (59.5% of total first-quarter revenues), which increased 8.7% on a year-over-year basis.
Industrial Technologies: This segment generated revenues of $645.6 million (40.5% of the total revenues), which improved 4% from the prior-year quarter.
Operating Details
In the first quarter, gross margin came in at 51%, which contracted 40 basis points (bps) year over year.
Total operating expenses were $595.4 million, reflecting a 21.9% year-over-year increase. As a percentage of revenues, both selling, general & administrative (SG&A) as well as research & development expenses increased from the year-ago quarter.
Operating margin was 13.6%, which contracted 500 bps on a year-over-year basis.
Segment wise, operating margin for Professional Instrumentation came in at 14.4%, which contracted 930 bps year over year.
Industrial Technologies operating margins came in at 16.3%, which expanded 110 bps from the year-ago quarter.
Balance Sheet
During the quarter, the company generated free cash flow growth of 31%.
Guidance
For second-quarter 2019, management expects adjusted net earnings in the range of 86-90 cents per share. The corresponding Zacks Consensus Estimate for the quarter is pegged at 93 cents per share.
For 2019, Fortive expects adjusted net earnings in the range of $3.55-$3.65 per share, including $0.20 from the Advanced Sterilization Products business. The Zacks Consensus Estimate for the same is pegged at $3.58 per share.
Fortive Corporation Price, Consensus and EPS Surprise
Fortive Corporation Price, Consensus and EPS Surprise | Fortive Corporation Quote
Zacks Rank & Other Stocks to Consider
Currently, Fortive carries a Zacks Rank #2 (Buy). Other top-ranked stocks in the broader technology sector include Amazon (AMZN - Free Report) , Ctrip.com International, Ltd. and Square (SQ - Free Report) , each carrying a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Long-term earnings growth for Amazon, Ctrip.com and Square is currently projected at 31.2%, 23% and 25%, respectively.
Zacks' Top 10 Stocks for 2019
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-holds for the year?
Who wouldn't? Our annual Top 10s have beaten the market with amazing regularity. In 2018, while the market dropped -5.2%, the portfolio scored well into double-digits overall with individual stocks rising as high as +61.5%. And from 2012-2017, while the market boomed +126.3, Zacks' Top 10s reached an even more sensational +181.9%.
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