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Roper Technologies (ROP) Up 0.5% Since Last Earnings Report: Can It Continue?

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A month has gone by since the last earnings report for Roper Technologies (ROP). Shares have added about 0.5% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Roper Technologies due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Roper's Q1 Earnings and Revenues Surpass Estimates

Roper has reported better-than-expected first-quarter 2021 results, with earnings surpassing estimates by 8.4% and sales beating the same by 1.3%.

The company’s adjusted earnings in the first quarter were $3.60 per share, surpassing the Zacks Consensus Estimate of $3.32. On a year-over-year basis, earnings jumped 18% from $3.05.

Revenue Details

In the reported quarter, Roper’s net revenues amounted to $1,528.6 million, up 13.2% year over year. Notably, adjusted revenues increased 13% year over year to $1,530 million. Organic revenues in the quarter decreased 1%, while acquisitions/divestitures and foreign currency translation had positive impacts of 12% and 1%, respectively.

Roper’s top line surpassed the Zacks Consensus Estimate of $1,509 million.

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

Application Software’s revenues totaled $576.6 million, representing 37.7% of the quarter’s top line. On a year-over-year basis, the segment’s revenues grew 42.3%.

Network Software & Systems generated revenues of $440.2 million, accounting for 28.8% of first-quarter revenues. The top line was up 0.5% year over year.

Measurement & Analytical Solutions generated revenues of $381 million, accounting for 24.9% of the quarter’s revenues. Sales grew 4.3% year over year.

Process Technologies generated revenues of $130.8 million, accounting for 8.6% of the quarter’s revenues. Sales were down 8% year over year.

Margin Profile

In the reported quarter, Roper’s cost of sales increased 8.3% year over year to $534.8 million. Cost of sales was 35% of the quarter’s net sales. Gross profit (adjusted) in the quarter grew 16% year over year to $995 million, while adjusted gross margin increased 150 basis points (bps) to 65%.

Selling, general and administrative expenses increased 16.9% year over year to $593.3 million. It represented 38.8% of net sales in the reported quarter. Adjusted earnings before interest, tax, depreciation and amortization were $561 million, reflecting year-over-year growth of 20.1%. Margin increased 220 bps to 36.7%. Interest expenses expanded 33.5% year over year to $60.6 million.

Balance Sheet & Cash Flow

Exiting the first quarter, Roper had cash and cash equivalents of $331 million, up 7.4% from $308.3 million recorded in the last reported quarter. Long-term debt fell 5.4% sequentially to $8,571.8 million.

During the quarter, the company’s payments under the revolving line of credit were $495 million.

The company generated net cash of $559.6 million from operating activities in the first three months of 2021, reflecting an increase of 53.8% from the year-ago comparable period. Capital expenditure totaled $9.1 million compared with $7.9 million a year ago. Free cash flow increased 54% to $543 million.
 
The company rewarded shareholders with a dividend payout of $58.8 million. The amount represents growth from $53.1 million distributed in the year-ago quarter.

Outlook

The company expects cash flow generation to be impressive in 2021 Also, Roper remains optimistic about the signs of recovery across the end markets, which were affected by the coronavirus pandemic. Further, synergistic gains from acquired assets are expected to be favorable.

For 2021, the company currently anticipates adjusted earnings of $14.75-$15.00 per share, higher than $14.35-$14.75 guided earlier.

For the second quarter, the adjusted earnings is projected to be $3.61-$3.65 per share.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates.

VGM Scores

Currently, Roper Technologies has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Roper Technologies has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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