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Roper (ROP) Displays Solid Prospects Amid Pandemic Scare

Zacks Equity Research
·3 min read

On Dec 28, we issued an updated research report on Roper Technologies, Inc. ROP.

In the past three months, this Zacks Rank #3 (Hold) stock has returned 4.8% compared with the industry’s growth of 16.8%.

Present Scenario

Roper stands to benefit from strength across its network software businesses and solid demand for laboratory software solutions. Also, growth in demand for the medical products at its Verathon business and recovery in short cycle industrial businesses are likely to favor its top-line performance in the quarters ahead. Notably, for the fourth quarter of 2020, it anticipates organic revenues for both of its Network Software & Systems and Measurement & Analytical Solutions segments to grow in a low-single-digit range.

Further, the company’s acquisition of Vertafore (in September 2020) will help it in generating revenues of $590 million and EBITDA of $290 million in 2021. Also, its buyout of WELIS and IFS (both in September 2020) will expand its suite of SaaS-based solution offerings for the life insurance and financial services industry. Additionally, in October 2020, it acquired EPSi, which will enhance its Strata business’ offerings in the healthcare industry.

Moreover, the company’s policy of rewarding shareholders handsomely through dividend payments will work in its favor. In the first nine months of 2020, it paid out dividends worth $160 million. In addition, it increased the quarterly dividend rate by 10% or 5 cents per share to 56.25 cents in November 2020.

However, the company remains wary about the pandemic-related woes for the upcoming quarters. Notably, for the fourth quarter, it anticipates organic revenues of the Application Software segment to be roughly flat due to lower anticipated bookings for its logo software license business. Moreover, organic sales of the Process Technologies segment are expected to decline 20% on account of continued weakness in the upstream oil & gas businesses.

Further, its high-debt profile poses a concern. Exiting the third quarter, its long-term debt (net of current portion) was $9,101.2 million, up 72.9% on a sequential basis.

Stocks to Consider

Some better-ranked stocks from the same space are EnPro Industries, Inc. NPO, Graco Inc. GGG and Kaman Corporation KAMN. While EnPro currently sports a Zacks Rank #1 (Strong Buy), Graco and Kaman carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

EnPro has a trailing four-quarter earnings surprise of 279.71%, on average.

Graco has a trailing four-quarter earnings surprise of 21.74%, on average.

Kaman has a trailing four-quarter earnings surprise of 43.61%, on average.

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