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Fortive (FTV) Beats Q1 Earnings Estimates, Lags Revenues

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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

 

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. (CTRP - Free Report) 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.

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