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Roper (ROP) to Divest TransCore Business to ST Engineering

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Roper Technologies, Inc. ROP recently entered into an agreement with Singapore Technologies Engineering Ltd (“ST Engineering”) for the divestment of its TransCore business. The deal is valued at about $2.68 billion in cash.

The company’s shares were up 0.3% to eventually close the trading session at $447.58 on Friday.

Based in Singapore, ST Engineering is a leading technology, defense and engineering group. The group, consisting of diversified businesses, is engaged in providing real-world solutions to aerospace, defense, smart city and public security sectors. ST Engineering, which serves a strong customer base in above 100 countries, generated revenues of $5.4 billion in 2020.

Inside the Headlines

TransCore specializes in providing open road tolling and advanced traffic management systems to the transportation industry. Roper anticipates the business to generate revenues of about $545 million and earnings before interest, tax, depreciation and amortization (EBITDA) of $135 million in 2021. It operates under Roper’s Network Software & Systems segment, which generated revenues of $458.7 million and contributed 28.9% to total revenues in second-quarter 2021.

The divestment is in sync with Roper’s strategy of restructuring its business portfolio. The transaction is expected to enable the company to better focus on and efficiently direct resources to its recurring revenue businesses and lower requirements for working capital. The company also expects the after-tax proceeds from the transaction to enhance its capital-deployment ability to acquire lucrative businesses.

The completion of the transaction, which is expected in the first quarter of 2022, is subject to certain customary conditions.

In August 2021, Roper signed a $350 million deal with Eddyfi/NDT for the divestment of its Zetec business. The divestment is expected to be completed at the end of 2021, subject to customary closing conditions.

Zacks Rank, Estimates and Price Performance

The company, with a $47.2-billion market capitalization, currently carries a Zacks Rank #2 (Buy). It stands to gain from strength across its DAT, ConstructConnect, Aderant, CliniSys and Data Innovations businesses along with recovery in the education and healthcare end markets. However, high debt levels are a concern.

In the past 60 days, earnings estimates for Roper have improved. The Zacks Consensus Estimate for its earnings is pegged at $15.19 for 2021 and $16.18 for 2022, suggesting growth of 0.3% and 0.5% from the respective 60-day-ago figures.

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The company’s shares have gained 7.9% against a 2.6% decline recorded by the industry in the past six months.

Other Key Picks

Some other top-ranked stocks from the same space are EnPro Industries, Inc. NPO, Kadant Inc. KAI and Nordson Corporation NDSN. All these companies sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

EnPro delivered an earnings surprise of 80.64%, on average, in the trailing four quarters.

Kadant delivered an earnings surprise of 22.26%, on average, in the trailing four quarters.

Nordson delivered an earnings surprise of 17.77%, on average, in the trailing four quarters.


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