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Flir Systems (FLIR) Down 2% Since Last Earnings Report: Can It Rebound?

Zacks Equity Research

A month has gone by since the last earnings report for Flir Systems (FLIR). Shares have lost about 2% 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' Q1 Earnings Match Estimates, Down Y/Y

FLIR Systems’ first-quarter 2020 adjusted earnings of 42 cents per share came in line with the Zacks Consensus Estimate. The figure, however, declined 20.8% from 53 cents reported in the prior-year quarter.

The company reported GAAP earnings of 11 cents compared with earnings of 45 cents in the year-ago quarter.

Inside the Headlines

FLIR Systems’ revenues inched up 1.4% year over year to $450.9 million in the reported quarter. Also, the top line beat the Zacks Consensus Estimate of $439 million by 2.7%. Impressive performance by the Industrial Technologies and the Defense Technologies segments led to the year-over-year increase in the top line.

Segment-wise, revenues in the Industrial Technologies segment were up 1.9% to $276.4 million. The upside can be attributed to heightened demand for EST cameras as a result of the COVID-19 pandemic.

Revenues in the Defense Technologies segment totaled $174.5 million, up 0.7% on a year-over-year basis. The upside can be attributed to contributions of unmanned revenues from the Aeryon Labs and Endeavor Robotics acquisitions.

Operational Statistics

The company recorded a total backlog of $859.3 million at the end of the first quarter of 2020, reflecting a 2.8% increase relative to the prior-year quarter.

The company’s total operating expenses grew 24.9% year over year to $190.9 million. Operating income for the quarter was $28.5 million compared with $81.1 million in the prior-year quarter.

Operating margin decreased to 6.3% from 18.2% in the prior-year quarter, primarily attributable to product mix in the Defense Technologies segment and increases in restructuring costs, consent agreement costs, research and development expenses, and deferred compensation costs.

Liquidity & Cash Flow

As of Mar 31, 2020, the company's cash and cash equivalents were $308.6 million compared with $284.6 million, as of Dec 31, 2019.

Long-term debt, net of current portion, totaled $636.3 million, down from $648.4 million, as of Dec 31, 2019.

Cash flow from operating activities in the first quarter of 2020 amounted to $50.9 million compared with the prior-year quarter’s $55.5 million.

Outlook

FLIR Systems has withdrawn its previously-issued guidance for 2020 due to the uncertainties concerning the COVID-19 pandemic.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended downward during the past month.

VGM Scores

At this time, Flir Systems has a strong Growth Score of A, a grade with the same score on the momentum front. However, 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 B. 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 these revisions 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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