FLIR Systems Misses Q2 Earnings, Beats Rev

Zacks

FLIR Systems Inc.’s (FLIR) second-quarter 2013 earnings per share (EPS) came in at 35 cents, up 30% from 27 cents in the year-ago-quarter. However, it missed the Zacks Consensus Estimate by 2 cents. Moreover, net income rose 22% to $50.2 million year over year.

The solid growth in earnings was aided by robust performances from Traficon and Lorex, the two businesses which the company recently acquired. The Integrated Systems division also contributed to FLIR System’s results. Moreover, margin improvement in the Commercial Systems division aided bottom-line growth.

Revenue

Total revenue was $389.3 million in the reported quarter, up 15% year over year, beating the Zacks Consensus Estimate of $367 million. The increase was driven by higher sales in both its divisions, with Commercial Systems delivering the best performance in five quarters.

Total backlog at the end of the quarter was approximately $528 million, the highest quarterly bookings in five years, which marked a year-over-year increase of $30 million and a quarter-over-quarter increase of $23 million.  

Segment Revenue

The Commercial Systems division’s revenues were $221.8 million, up 17% year over year. Within the Commercial Systems division, the Thermal Vision and Measurementsegment (:TVM) revenues increased 23% to $175 million. In Commercial Systems, the Raymarine segment’s revenues were $46.9 million, down 1% year over year.

Backlog in the Commercial Systems division was $190 million, up $18 million and $25 million from the prior quarter the prior year, respectively. The Commercial Systems division bookings in the reported quarter increased 19% year over year. The TVM segment’s bookings increased 24% year over year, while Raymarine bookings dropped nearly 1%. TVM's thermography line of business reported a 10% decline in bookings from the previous year, primarily due to weak European economy. However, TVM’s Original Equipment Manufacture (:OEM) line of business reported a year-over-year 10% increase in bookings, driven by strong orders from military OEMs.

The Government Systems division’s revenues came in at $167.5 million, rising 13% year over year. The increase was mainly aided by Integrated Systems, a segment within Government Systems, which recorded a 160%year-over-year revenue rise to $34.5 million. The increase was mainly due to impressive deliveries to the U.S. Customs and Border Protection, under the MSC program.

However, the strong performance in Integrated Systems was partially offset by the Surveillance and Detection segments, the revenues of which fell 1% to $118.6 million and 9% to $14.4 million, respectively.

Backlog for the Government Systems division at the end of the quarter was $339 million, rising $5 million from the prior year. The backlog from the Surveillance segment increased 8% year over year to $269 million, while Integrated System’s backlog declined by $18 million.

Income and Expenses

Operating income in the reported quarter was $70.3 million compared with $60.7 million in second-quarter 2012. Selling and general expenses increased 11.7% to $80.2 million. Research and development expense was $39.6 million compared with $37.5 million in the comparable year-ago quarter.

Balance Sheet & Cash Flow

Cash and cash equivalents improved significantly to $492.4 million compared with $321.7 at year-end 2012. Long-term debt was $379.8 million, compared with $248.3 million at the end of 2012.

Cash flow from operations was at a quarterly high of $134.3 million, compared with $77.3 million in the comparable year-ago quarter.

Share Repurchase & Dividend

For the first half of 2013, the company repurchased 4.5 million shares at an average price of $26.05 per share. However, during the quarter the company repurchased 636,000 shares. The company declared a quarterly cash dividend of 9 cents per share, payable on Sep 6, 2013, to shareholders of record as of Aug 19, 2013.

Outlook

Along with the earnings release, management reaffirmed its 2013 guidance. FLIR Systems expects earnings per share for 2013 to be in the range of $1.56–$1.66, reflecting an increase of 8%–14% from 2012. Total revenue is expected to be in the range of $1.5 billion–$1.6 billion, up by 7%–14% from 2012.

FLIR Systems currently carries a Zacks Rank #3 (Hold). Some other companies in the industry that are worth a look include Astronics Corporation (ATRO), Orbital Sciences Corp. (ORB) and AAR Corp. (AIR). While Astronics carries a Zacks Rank #1 (Strong Buy), Orbital Sciences and AAR both have a Zacks Rank #2 (Buy).

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