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Roper (ROP) Announces Pricing of $1.2B Senior Notes Offering

Zacks Equity Research

Roper Technologies, Inc. ROP, on Aug 19, priced an offering of $1.2 billion of its senior unsecured notes, including $500 million of 2.350% senior notes due to expire on Sep 15, 2024, and $700 million of 2.950% senior notes due to expire on Sep 15, 2029. This offering is anticipated to close on Aug 26, 2019, depending on customary closing conditions.

As communicated by the company, notes due to expire in 2024 have been priced at 99.815% of the principal amount while that set to expire in 2029 has been offered to the public at 99.783% of the principal amount. Notably, interest rates on the notes will be paid semi-annually on Mar 15 and Sep 15, starting from Mar 15, 2020.

Ratings of the issuance are expected to be ‘Baa2 (stable)’ by Moody's Investors Service and ‘BBB+ (stable)’ by Standard & Poor’s Ratings Services.

Roper intends to utilize the funds for meeting general corporate purposes and acquisitions.

Debt Profile

The company has a highly leveraged balance sheet. Its long-term debt grew roughly 17.7% (CAGR) in the last five years (2014-2018). Exiting second-quarter 2019, the company had long-term debt of approximately $4,718.9 million, up from $4,487 million recorded at the end of first-quarter 2019. Its net interest expenses were $45.1 million compared with $43.7 million recorded in the first quarter. Notably, during the first half of 2019, the company used $225 million for the payment made under revolving line of credit. Although the current notes offering will help in meeting general corporate purposes and acquisitions, we believe that it will also add to Roper’s existing debt balance. Unwarranted rise in debt levels, in turn, can inflate its financial obligations and hurt profitability.

Existing Business Scenario

Roper enjoys a dominant position in most of the markets where it operates.  The company expects stronger sales, unique niche market strategy, healthy balance sheet and gains from acquired assets to drive its profitability in 2019. In addition, Roper’s innovative product pipeline is likely to be a major growth catalyst over the long term. For 2019, the company expects overall revenues to increase 4% year over year, on an organic basis.

In the past three months, this Zacks Rank #2 (Buy) company has gained 2.7% against the industry’s decline of 1.6%.


Further, the stock’s earnings estimates are currently pegged at $13.00 for 2019 and $13.31 for 2020, reflecting growth of 0.5% and 0.9%, respectively, from the respective 30-day-ago tallies.

Other Stocks to Consider

Some other top-ranked stocks from the same space include Dover Corporation DOV, DXP Enterprises, Inc. DXPE and Graham Corporation GHM. All these companies carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Dover surpassed estimates in each of the trailing four quarters, with an average positive earnings surprise of 6.91%.

DXP Enterprises outpaced estimates thrice in the preceding four quarters, with an average positive earnings surprise of 18.06%.

Graham’s earnings surprise in the last reported quarter was 100.00%.

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