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Fortive (FTV) Beats Q2 Earnings Estimates, Lags Revenues

Zacks Equity Research

Fortive Corporation FTV reported second-quarter 2019 earnings of 90 cents per share, surpassing the Zacks Consensus Estimate by a penny. Also, the figure increased 18.4% from the year-ago quarter and 30.4% on a sequential basis.

Revenues also increased 16.4% year over year to $1.86 billion. In addition, core revenues grew 2% from the year-ago quarter. However, the top line missed the Zacks Consensus Estimate by 3.29%.

The company stated that the integration of Advanced Sterilization Products is well on track and should contribute to top-line growth in the near term. Other acquisitions including Industrial Scientific and Landauer aided results in the second quarter.

Notably, shares of Fortive have returned 0.8% in the past year compared with its industry’s 7.7% growth.

 

Top Line in Detail

Fortive operates under the following two organized segments.

Professional Instrumentation: The segment generated revenues of $1.1 billion (60.8% of total first-quarter revenues), which increased 27.5% on a year-over-year basis. The increase was driven by contributions from acquisitions.

Industrial Technologies: This segment generated revenues of $731.4 million (39.2% of total revenues), which improved 2.6% from the prior-year quarter.

Fortive Corporation Price, Consensus and EPS Surprise

 

Fortive Corporation Price, Consensus and EPS Surprise

Fortive Corporation price-consensus-eps-surprise-chart | Fortive Corporation Quote

Operating Details

In the second quarter, gross margin came in at 48.5%, which contracted 340 basis points (bps) year over year.

Total operating expenses were $654.5 million, reflecting a 29.2% year-over-year increase. As a percentage of revenues, selling, general & administrative (SG&A) expenses increased from the year-ago quarter, while research & development costs decreased.

Operating margin was 13.4%, which contracted 690 bps on a year-over-year basis.

Segment wise, operating margin from Professional Instrumentation came in at 10.8%, which contracted 1,360 bps year over year.

Industrial Technologies operating margins came in at 16.3%, which expanded 200 bps from the year-ago quarter.

Balance Sheet

During the quarter, the company generated free cash flow of $236 million.

Guidance

For third-quarter 2019, management expects adjusted net earnings in the range of 83-88 cents per share. The corresponding Zacks Consensus Estimate for the quarter is pegged at 97 cents.

For 2019, Fortive expects adjusted net earnings in the range of $3.45-$3.60 per share. The Zacks Consensus Estimate for the same is pegged at $3.59.

Zacks Rank &Stocks to Consider

Currently, Fortive carries a Zacks Rank #4 (Sell). Some better-ranked stocks in the broader technology sector include Alibaba Group Holding Limited BABA, Etsy, Inc. ETSY and eBay Inc. EBAY, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Long-term earnings growth for Alibaba, Etsy and eBay is currently projected at 26.8%, 19.3% and 9.4%, respectively.

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