Roper Technologies, Inc. ROP currently seems to be a smart choice for investors seeking exposure in the industrial machinery space. Solid fundamentals and positive revision in earnings estimates are reflective of healthy growth potential of the stock.
The Sarasota, FL-based company currently carries a Zacks Rank #2 (Buy). It belongs to the Zacks Manufacturing – General Industrial industry, which is in turn a sub-industry of Zacks Industrial Products sector. More construction and remodeling activities, infrastructural development, lower taxes (due to the implementation of the U.S. Tax Cuts and Jobs Act), technological advancement in manufacturing processes, and other tailwinds aid the industry.
Below, we discussed why investing in Roper will be a smart choice for investors.
Share Price Performance, Earnings Projections: Market sentiments seem to be working in favor of the company over time. In the past year, its share price has gained 19.5%, higher than the industry’s growth of 2%.
We believe that impressive financial results helped in driving sentiments for the stock. The company beat earnings estimates in the last four quarters, the average earnings surprise being 6.92%. Notably, earnings surprise was 0.99% in the last reported quarter.
For 2019, the company anticipates gaining from solid sales, unique niche market strategy, healthy balance sheet and acquired assets. It predicts adjusted earnings per share to be $12.94-$13.06 in the year, higher than the previously stated $12.70-$13.00.
Further, the company’s earnings estimates have been raised in the past 30 days. The Zacks Consensus Estimate for its earnings is pegged at $13.00 for 2019 and $13.36 for 2020, reflecting respective growth of 0.2% and 0.8% from the figures mentioned 30 days ago.
Roper Technologies, Inc. Price and Consensus
Roper Technologies, Inc. price-consensus-chart | Roper Technologies, Inc. Quote
Top-Line Strength: Roper serves its customers through four business segments, including Application Software, Network Software & Systems, Measurement & Analytical Solutions, and Process Technologies.
The company believes that the Application Software segment will gain from the demand for Deltek business’ enterprise software offerings and strength in the Strata business. Also, healthy performances of DAT, iTrade, MHA and SoftWriters businesses as well as acquired assets will benefit the Network Software & Systems segment. The Measurement & Analytical Solutions segment will benefit from solid demand for the NDI business' electromagnetic and optical measurement systems as well as strength in Verathon.
For 2019, the company anticipates overall revenues to increase 4% year over year on an organic basis.
The Zacks Consensus Estimate for Roper’s revenues is currently pegged at $5.41 billion for 2019 and $5.67 billion for 2020. Estimates reflect year-over-year growth of 4.2% for 2019 and 4.8% for 2020.
Buyouts: Roper has been fortifying its product portfolio and leveraging business opportunities through the addition of assets. The company used $539.2 million (net of cash acquired) on acquisitions in the first half of 2019. Also, buyouts boosted sales by 2% in the second quarter.
Recently, the company signed an agreement to Exton, PA-based iPipeline. The transaction was valued at $1.625 billion and will be completed in the third quarter of 2019.
Roper believes that iPipeline’s efficient management team, solid customer base and customer retention policies will be beneficial. The buyout will help generate revenues of $200 million and free cash flow (after-tax) of $70 million in 2020. Also, cash accretion is predicted immediately from this buyout along with organic revenue growth in a high-single digit.
In April 2019, the company acquired Foundry, a specialist in providing software technologies. This buyout is predicted to generate revenues of $75 million in the first year.
Rewards to Shareholders: Roper uses capital for product development, capacity expansion, acquisitions and rewarding shareholders handsomely. The company paid out dividends of $95.6 million in the first half of 2019, up from $84.5 million paid in the year-ago comparable period.
Notably, Roper raised its quarterly dividend rate by 12% or 5 cents per share to 46.25 cents in November 2018. On an annualized basis, the dividend payout rose to $1.85 from $1.65 per share.
Debt Profile: Roper’s long-term debt at the end of the second quarter of 2019 was approximately $4,718.9 million, down 4.5% from 2018 level. The company’s debt profile is better than the industry. Its long-term debt to capital of 36.1% is lower than the industry’s 45.4%.
Other Key Picks
Some other top-ranked stocks in the industry are Graham Corporation GHM, DXP Enterprises, Inc. DXPE and Dover Corporation DOV. While Graham sports a Zacks Rank #1 (Strong Buy), both DXP Enterprises and Dover carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
In the past 60 days, earnings estimates for these stocks improved for the current year. Further, earnings surprise for the last reported quarter was 100% for Graham, 4.29% for DXP Enterprises and 0.65% for Dover.
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