Fortive (FTV) Q3 Earnings & Revenues Miss Estimates, Rise Y/Y
Fortive Corporation FTV reported third-quarter 2023 adjusted earnings of 85 cents per share, missing the Zacks Consensus Estimate by 1.2%. However, the bottom line increased 8% year over year.
Revenues rose 2.6% year over year to $1.495 billion but missed the Zacks Consensus Estimate by 1.4%. Core revenues also moved up 2.5% from the year-ago levels. Nonetheless, core growth was affected by specific headwinds in the healthcare vertical.
The year-over-year improvement in the top line was driven by continued momentum in software and services businesses amid a challenging macroeconomic environment.
The company also announced that it has entered into an agreement to acquire a leading company of high-power electronic testing solutions for energy storage, mobility, hydrogen and renewable energy applications — EA Elektro-Automatik Holding GmbH.
Fortive Corporation Price, Consensus and EPS Surprise
Fortive Corporation price-consensus-eps-surprise-chart | Fortive Corporation Quote
The acquisition is valued at $1.45 billion in cash, accounting for $215 million in tax benefits from Bregal Unternehmerkapital. The completion of this buyout is contingent on customary closing requirements and regulatory approvals, with an anticipated closure in early first-quarter 2024, added Fortive.
This will likely help Fortive to bolster its position in electronic testing and measurement. Also, the buyout will likely improve FTV's position in high-growth markets across various industries and generate substantial value for customers and shareholders. This will be financed using a combination of existing cash and debt financing.
However, the company tempered guidance for 2023. Management now projects adjusted net earnings to be between $3.37 per share and $3.40 per share (earlier view: $3.36-$3.42). The Zacks Consensus Estimate is pegged at $3.43.
Revenues are now anticipated to be between $6 billion and $6.1 billion (earlier view: $6.070-$6.1 billion). The Zacks Consensus Estimate is pegged at $6.1 billion. Free cash flow is forecast to be $1.250 billion.
Owing to uncertain economic recovery in China and delayed revival in Invetech, FTV has also adjusted its outlook for the fourth quarter. Core revenue growth is suggested to be between 1.5% and 3%
For fourth-quarter 2023, management now estimates adjusted net earnings in the range of 92-95 cents per share compared with the earlier guided range of 94-97 cents.
Revenues are now envisioned in the $1.555-$1.575 billion band (earlier expectations were in the range of $1.580-$1.595 billion).
The stock was down 8% on Oct 25 and closed session at $64.60. In the past year, shares of FTV have gained 3.2% of their value against the sub-industry’s decline of 3.7%.
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Top Line in Detail
Fortive operates under the following three organized segments.
Intelligent Operating Solutions: The segment generated revenues of $644 million (contributing 43.1% to total revenues), up 5% on a year-over-year basis.
Precision Technologies: Segmental revenues totaled $531 million (35.5%), up 1.3% from the prior-year levels.
Advanced Healthcare Solutions: This segment registered revenues of $320 million (21.4%), up 0.3% from a year ago.
Operating Details
In the quarter under review, adjusted gross margin reached 59.7%, which expanded 160 basis points (bps) year over year.
Total operating costs (selling, general and administrative expenses, and research and development expenditures) were $601.9 million, up 1.4% year over year.
Adjusted operating margin was 25.9%, extending 150 bps on a year-over-year basis.
Segment-wise, adjusted operating margins of Intelligent Operating Solutions and Precision Technologies were 32% and 26.5%, rising 230 bps and 60 bps, respectively, year over year.
Advanced Healthcare Solutions’ adjusted operating margin of 22.5% improved 200 bps.
Balance Sheet & Cash Flow
As of Sep 29, cash and cash equivalents were $714.1 million compared with $712.8 million as of Jun 30.
As of Sep 29, accounts receivables were $925.4 million compared with $935.2 million as of Jun 30.
FTV generated operating cash flow of $411.4 million compared with $329.8 million in the previous-year quarter.
Non-GAAP free cash flow was $383.5 million compared with $307.3 million in the prior-year quarter.
Zacks Rank
Currently, Fortive has a Zacks Rank #3 (Hold).
Key Picks
Some better-ranked stocks worth consideration in the broader technology space are Asure Software ASUR, Synopsys SNPS and VMware VMW. Each stock sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Asure Software’s 2023 earnings per share (EPS) has increased 5.9% in the past 60 days to 54 cents.
Asure Software’s earnings beat the Zacks Consensus Estimate in each of the last four quarters, the average surprise being 676.4%. Shares of ASUR have climbed 41.6% in the past year.
The Zacks Consensus Estimate for Synopsys’ fiscal 2023 EPS has gained 0.4% in the past 60 days to $11.09. SNPS’ long-term earnings growth rate is 16.7%. Shares of SNPS have gained 57.4% in the past year.
The Zacks Consensus Estimate for VMware’s fiscal 2024 EPS has improved 5.9% in the past 60 days to $7.23.
VMware’s earnings outpaced the Zacks Consensus Estimate in two of the last four quarters while missing twice. The average earnings surprise is 1.2%. Shares of VMW have jumped 33.9% in the past year.
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