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Roper is Set to Acquire Foundry, Declares Cash Dividend

Zacks Equity Research

Roper Technologies, Inc. ROP recently announced that it has entered into an agreement to acquire Foundry for £410 million in cash. Notably, the transaction, which is likely to be completed in Apr 2019, is subject to regulatory approvals and customary closing conditions.

Based in London, Foundry is the developer of software technologies for digital design, entertainment and media industries. Notably, Foundry’s name and its brands are likely to stay unchanged, following the closure of the transaction.

Rationale Behind the Acquisition

The buyout will boost Roper’s product portfolio as well as enhance its offerings to customers. The company is likely to finance the transaction with the use of its revolving credit facility and cash in hand. Notably, Roper believes that the acquisition will be accretive to its revenues by about $75 million during the first year of possession.

In addition, the board of directors approved the payment of a quarterly cash dividend of 46.25 cents per share. The dividend will be paid on Apr 22, 2019 to shareholders of record as on Apr 8.

Our Take

Roper has maintained a dominant position in most of the markets where it operates. Its diversified revenue stream enables it to counter headwinds stemming from a cyclical business environment. We believe that the company’s innovative product pipeline is likely to be a major growth driver in the upcoming quarters. The company is benefitting from robust sales generated by its network, software and product businesses. For 2019, the company predicts that organic sales will increase 3-5%.

Moreover, the company expects that the unique niche market strategy, healthy balance sheet and gains from acquired assets will drive profitability in 2019. It predicts adjusted earnings per share of $12-$12.40 for 2019, higher than $11.81 recorded in 2018. In the past three months, shares of the Zacks Rank #2 (Buy) company have rallied gained 28.6% compared with the industry’s rise of 20.9%.

In addition, the company is committed to rewarding shareholders handsomely through dividend payments. It is worth mentioning here that the company increased the quarterly dividend rate by 12% or 5 cents per share to 46.25 cents in November 2018. On an annualized basis, the dividend increased to $1.85 from $1.65 per share. We believe that such initiatives are reflective of a strong cash position.

Other Stocks to Consider

A few other top-ranked stocks from the same space are Sun Hydraulics Corporation SNHY, DXP Enterprises, Inc DXPE and Tennant Company TNC. While Sun Hydraulics and DXP Enterprises sport a Zacks Rank #1, Tennant carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Sun Hydraulics delivered positive earnings surprise of 40.00% in the last reported quarter.

DXP Enterprises has surpassed estimates thrice in the trailing four quarters, the average positive earnings surprise being 46.55%.

Tennant has outpaced estimates in each of the preceding four quarters, with an average positive earnings surprise of 48.53%.

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