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Is FLIR Systems (FLIR) Poised to Beat Q2 Earnings Estimates?

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FLIR Systems, Inc. FLIR is scheduled to report second-quarter 2018 results on Jul 25, before the opening bell.

In the last reported, the company delivered a positive earnings surprise of 11.63%. Impressively, FLIR Systems has outperformed the Zacks Consensus Estimate in each of the trailing four quarters, with an average beat of 6.49%.

We expect FLIR Systems to score an earnings beat in the soon to-be-reported quarter as well.

Why a Likely Positive Surprise?

Our proven model shows that FLIR Systems has the right combination of two key ingredients. A stock needs to have both — a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — for this to happen. This is perfectly the case here as you will see below:

Zacks ESP: FLIR Systems has an Earnings ESP of +1.03%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: The company carries a Zacks Rank #2, which when combined with a positive ESP makes us reasonably confident of an earnings beat. You can see the complete list of today’s Zacks #1 Rank stocks here.

Conversely, we caution against stocks with a Zacks Ranks #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is witnessing negative estimate revisions.

FLIR Systems, Inc. Price and EPS Surprise

FLIR Systems, Inc. Price and EPS Surprise | FLIR Systems, Inc. Quote

 

Factors Driving Better-Than-Expected Results

In April 2018, FLIR Systems announced the completion of its strategic investment in DroneSense — a provider of comprehensive solutions in unmanned aircraft systems (UAS) space. This investment is expected to help FLIR Systems offer improved mission-critical solutions for expanding in the drone business. Notably, the company’s Industrial business segment, which manufactures thermal imaging payloads for UAS, recorded a solid 10.3% revenue growth in first-quarter 2018.

Considering the aforementioned investment, we may expect to witness increased demand for FLIR Systems’ advanced thermal imaging payloads for UAS platforms, which in turn should boost its Industrial units’ top line in the second quarter.

In terms of product innovation, the company launched FLIR Ranger mid-range panel radars and the Recon V UltraLite thermal monocular in May 2018. These equipments are expected to help border patrol forces in performing better surveillance missions. Such product introductions are likely to allow the company’s Government and Defense segment to reflect improved annual revenues in the upcoming quarterly results.

However, divestment of SMB security business might continue hurting the Commercial business segment’s revenues, which in turn may weigh on the company’s overall quarterly revenues. In line with this, the Zacks Consensus Estimate for FLIR Systems’ revenues is pegged at $426.5 million, reflecting a year-over-year decline of 2%.

During the first quarter of 2018, FLIR Systems witnessed very strong operating leverage which in turn benefited its bottom line. We may expect the company’s second quarter results to reflect similar expansion in segmental operating margin, which in turn should boost its bottom-line growth. The Zacks Consensus Estimate for FLIR Systems’ earnings is pegged at 49 cents, reflecting a year-over-year improvement of 16.7%.

Other Stocks That Warrant a Look

Here are some companies in the Aerospace sector that you may want to consider as our model shows that these too have the right combination of elements to post an earnings beat this quarter:

Raytheon Company RTN is expected to report second-quarter 2018 results on Jul 26. The company has an Earnings ESP of +1.10% and a Zacks Rank #2.

Curtiss-Wright CW is expected to report second-quarter 2018 results on Jul 25. The company has an Earnings ESP of +0.15% and a Zacks Rank of 2.

Embraer ERJ is expected to report second-quarter 2018 results on Jul 27. The company has an Earnings ESP of +24.59% and a Zacks Rank #3.

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