Investors seeking exposure in the industrial machinery space can choose from stocks that sport a Zacks Rank #1 (Strong Buy) or #2 (Buy). Of the many investment options, we believe that Roper Technologies, Inc. ROP will be a smart choice. This Sarasota, FL-based company’s stock currently carries a Zacks Rank #2.
The industry, to which Roper belongs, is currently positioned in the top 40% of more than 250 Zacks industries. Per our research, the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1. We believe that the strengthening housing market, infrastructural development, lower taxes (due to the implementation of the U.S. Tax Cuts and Jobs Act), solid manufacturing activities and other tailwinds aid the industry.
Below, we discussed why investing in Roper will be a smart choice for investors.
Share Price Performance, Impressive Earnings Outlook: Market sentiments seem to be working in favor of Roper over time. In the past three months, the company’s share price has improved 7.5% compared with the industry’s growth of 2.7% and the Zacks Industrial Products sector’s increase of 2.1%.
The company delivered impressive results for the fourth quarter of 2018, with earnings beating estimates by 2.88%. On a year-over-year basis, the bottom line expanded 19.3% on the back of solid revenue growth and margin improvement.
For 2019, the company anticipates that stronger sales, the unique niche market strategy, healthy balance sheet and gains from acquired assets will drive bottom-line performance. Adjusted earnings per share are predicted to be $12-$12.40, higher than $11.81 recorded in 2018. Earnings for the first quarter are estimated to be $2.74-$2.80 per share.
Impressive results and solid outlook created positive sentiments for Roper. In the past 30 days, earnings estimates for 2019 have been raised by three brokerage firms, and that for 2020 increased by one firm and lowered by one. Currently, the Zacks Consensus Estimate for earnings is pegged at $12.27 for 2019 and $12.73 for 2020, reflecting growth of 0.7% and 0.6% from the respective tallies 60 days ago.
Roper Technologies, Inc. Price and Consensus
Roper Technologies, Inc. Price and Consensus | Roper Technologies, Inc. Quote
Notably, the company’s share price has increased roughly 10.8% since the release of the fourth-quarter 2018 results on Feb 1, 2018.
Revenue Growth: In the fourth quarter of 2018, Roper’s revenues surpassed estimates by 1.77% and increased 11.6% year over year. Organically, sales expanded 9% on the back of strength in its network, software and product businesses.
For 2019, the company anticipates organic sales to increase 3-5%. On a segmental basis, organic sales are predicted to grow 4-6% for RF Technology driven by stronger sales from software assets, 4-6% for Medical & Scientific Imaging, and in a low-single digit for Industrial Technology.
The Zacks Consensus Estimate for revenues is currently pegged at $2.7 billion for 2018 and $2.95 billion for 2019. Estimates for 2019 reflect year-over-year growth of 9.3%.
Inorganic Moves: Over time, Roper fortified its product portfolio and leveraged business opportunities through the addition of assets and disposition of non-core assets. Notably, the company made seven acquisitions in 2018. Acquired assets added 4% to sales growth in the fourth quarter and 3% in 2018.
Also, the company completed the divestment of the Scientific Imaging business to Teledyne Technologies for cash consideration of $225 million.
Shareholder-Friendly Policies: Roper uses capital for product development, capacity expansion, acquisitions and rewarding shareholders handsomely. A brief discussion on dividend payments is provided below.
In 2018, Roper paid dividends, totaling $170.1 million, to its shareholders. This payment surpasses the previous year’s figure by 19.1%. It is worth mentioning here that the company increased the quarterly dividend rate by 12% or 5 cents per share to 46.25 cents in November 2018. The annual dividend rate is now at $1.85 per share.
Other Key Picks
Some other top-ranked stocks in the sector are iRobot Corporation IRBT, Atlas Copco AB ATLKY and Dover Corporation DOV. While both iRobot and Atlas sport a Zacks Rank #1, Dover carries 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 2019 have improved for iRobot, Atlas and Dover. Further, the earnings surprise in the last reported quarter was a positive 64.71% for iRobot, 42.42% for Atlas and 10.85% for Dover.
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