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Roper (ROP) Tops on Q3 Earnings, To Divest CIVCO Radiotherapy

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Roper Technologies, Inc. ROP has reported mixed results for third-quarter 2021, with earnings surpassing estimates by 1.3%. Meanwhile, its sales lagged estimates by 9.9%.

The company’s adjusted earnings in the third quarter were $3.91 per share, surpassing the Zacks Consensus Estimate of $3.86. On a year-over-year basis, earnings expanded 23.3% from $3.17 on the back of healthy sales generation, partially offset by higher costs and expenses due to supply-chain issues.

Revenue Details

In the reported quarter, Roper’s net revenues amounted to $1,462.8 million, up 22.1% year over year. Notably, adjusted revenues increased 22% year over year to $1,463 million. Organic sales in the quarter increased 12%, while acquisitions/divestitures and foreign currency translation had positive impacts of 9% and 1%, respectively.

However, Roper’s top line lagged the Zacks Consensus Estimate of $1,624 million.

The company reports revenues under four segments. A brief discussion of the quarterly results is provided below:

Application Software’s revenues totaled $603.4 million, representing 41.3% of the quarter’s top line. On a year-over-year basis, the segment’s revenues expanded 34.7%. Organic sales in the quarter increased 10% year over year.

Network Software & Systems generated revenues of $343.4 million, accounting for 23.5% of third-quarter revenues. The top line grew 19.2% year over year. Organic sales in the quarter increased 17% year over year.

Measurement & Analytical Solutions generated revenues of $392.4 million, accounting for 26.8% of the quarter’s revenues. Sales increased 9.9% year over year. Organic sales in the quarter increased 9% year over year.

Process Technologies generated revenues of $123.6 million, accounting for 8.4% of the quarter’s revenues. Sales were up 17.4% year over year. Organic sales in the quarter grew 16% year over year.

Margin Profile

In the reported quarter, Roper’s cost of sales increased 20.2% year over year to $466.7 million. Cost of sales was 31.9% of the quarter’s net sales. Gross profit (adjusted) in the quarter grew 23% year over year to $996.1 million, while adjusted gross margin increased 50 basis points (bps) year over year to 68.1%.

Selling, general and administrative expenses increased 23.6% year over year to $592.6 million. It represented 40.5% of net sales in the reported quarter. Adjusted earnings before interest, tax, depreciation and amortization (EBITDA) were $602 million, reflecting year-over-year growth of 20.2%. Margin decreased 70 bps year over year to 41.2%. Interest expenses decreased 6.4% year over year to $58.2 million.

Balance Sheet & Cash Flow

Exiting the third quarter, Roper had cash and cash equivalents of $352.5 million, up 4.4% from $337.8 million recorded in the last reported quarter. Long-term debt decreased 8.2% sequentially to $7,529.9 million.

In the first three quarters of 2021, the company’s repayment under the revolving line of credit was $1,240 million.

The company generated net cash of $1319.3 million from operating activities in the first three quarters of 2021, reflecting an increase of 56.6% from the year-ago comparable period. Capital expenditure totaled $22.5 million compared with $20.9 million in the year-ago period.

The company rewarded shareholders with a dividend payout of $176.9 million in the first three quarters of 2021. The amount represents growth from $160 million distributed in the first three quarters of 2020.

Important Event

Concurrently, Roper announced that it signed an agreement to divest for $120 million its CIVCO Radiotherapy business. The other party to the transaction is Blue Wolf Capital Partners LLC’s affiliate. The transaction is likely to complete in the fourth quarter of 2021.

Notably, the CIVCO Medical Solutions business will remain part of Roper and will operate as an independent entity.

Outlook

For 2021, Roper predicts earnings from continuing operations of $14.08-$14.12 per share. Including a $1.18-per-share impact of discontinued operations, the company’s earnings are pegged at $15.26-$15.30, higher than the previously mentioned $15.00-$15.20.

For the fourth quarter, the company’s earnings from continuing operations are expected to be $3.62-$3.66 per share.

On a segmental basis, organic sales growth of Application Software will be similar to the third-quarter level. Low-double digit organic sales growth is predicted for Network Software & Systems, while sales for Measurement & Analytical Solutions are expected to be in the low-double digits. Process Technologies’ organic sales for the quarter are predicted to grow in the high-teens.

Roper Technologies, Inc. Price, Consensus and EPS Surprise

Roper Technologies, Inc. Price, Consensus and EPS Surprise
Roper Technologies, Inc. Price, Consensus and EPS Surprise

Roper Technologies, Inc. price-consensus-eps-surprise-chart | Roper Technologies, Inc. Quote

Zacks Rank & Stocks to Consider

With a market capitalization of $50.7 billion, Roper currently carries a Zacks Rank #4 (Sell).

Some better-ranked stocks in the industry are DXP Enterprises, Inc. DXPE, Nordson Corporation NDSN, and Kadant Inc. KAI. While both DXP Enterprises and Nordson presently sport a Zacks Rank #1 (Strong Buy), Kadant carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

In the past 60 days, earnings estimates for these companies have improved for the current year.


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