Is Roper (ROP) Likely to Disappoint This Earnings Season?
Roper Technologies, Inc. ROP is scheduled to report third-quarter 2018 results on Oct 26, before the market opens.
The company delivered better-than-expected results in each of the trailing four quarters, resulting in an average positive earnings surprise of 4.48%. Notably, in the last reported quarter, the company’s earnings of $2.89 surpassed the Zacks Consensus Estimate of $2.70.
Let’s see how things are shaping up for this announcement.
Factors to Consider
Of late, Roper has been dealing with rising cost of sales and operating expenses. Notably, in the first half of 2018, the company’s cost of sales expanded 9.7% from the year-ago period while operating expenses jumped 11.1%. We believe that rising costs and expenses, if unchecked, will be detrimental to its profitability, going forward.
Also, the company’s policy of making large number of acquisitions adds to the integration risks. The frequent buyouts can negatively impact its balance sheet in the form of a high level of goodwill and intangible assets, which totaled nearly $12.3 billion or 86.3% of total assets as of Sep 30, 2017. Moreover, frequent acquisitions are a distraction for management and can impact organic growth over the long term.
Moreover, each business segment of the company faces stiff competition. Extensive business rivalry increases the bargaining power of end-users and thus, exposes the company to risks of market share loss. In order to retain competitive power, it is forced to incur heavy innovation investments, which adds to its aggregate debt level.
However, the Zacks Consensus Estimates for third-quarter revenues of Roper’s Medical & Scientific Imaging, RF Technology, Industrial Technology and Energy Systems & Controls segments are currently pegged at $373 million, $564 million, $229 million and $153 million respectively, higher than the corresponding tallies of $344 million, $481 million, $200 million and $135 million recorded in the year-ago quarter.
Earnings Whispers
Our proven model does not conclusively show an earnings beat for Roper in the to-be-reported quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. But that is not the case here as you will see below.
Earnings ESP: Roper has an Earnings ESP of -0.23%. This is because the Zacks Consensus Estimate of $2.94 is higher than the Most Accurate Estimate of $2.93. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Roper Technologies, Inc. Price and EPS Surprise
Roper Technologies, Inc. Price and EPS Surprise | Roper Technologies, Inc. Quote
Zacks Rank: The company carries a Zacks Rank #4 (Sell).
As it is, we caution against Sell-rated stocks (Zacks Rank #4 or 5) going into an earnings announcement, especially when the company is seeing negative estimate revisions.
Key Picks
Here are some companies that you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:
Flowserve Corporation FLS has an Earnings ESP of +1.72% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Middleby Corporation MIDD has an Earnings ESP of +0.64% and a Zacks Rank #2.
Nordson Corporation NDSN has an Earnings ESP of +1.11% and a Zacks Rank #3.
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Roper Technologies, Inc. (ROP) : Free Stock Analysis Report
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