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Why Is Fortive (FTV) Down 3.5% Since Last Earnings Report?

Zacks Equity Research
·3 mins read

A month has gone by since the last earnings report for Fortive (FTV). Shares have lost about 3.5% in that time frame, underperforming the S&P 500.

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

Fortive’s Q2 Earnings and Revenues Beat Estimates

Fortive Corporation reported second-quarter 2020 earnings of 68 cents per share, which outpaced the Zacks Consensus Estimate of 58 cents. The figure decreased 24.4% from the year-ago quarter but increased 8.1% on a sequential basis.

Revenues decreased 15.7% year over year and 8.3% sequentially to $1.57 billion. Also, core revenues declined 16.8% from the year-ago quarter.

However, the top line outpaced the Zacks Consensus Estimate by 2.9%.

Top Line in Detail

Fortive operates under the following two organized segments.

Professional Instrumentation: The segment generated revenues of $1.03 billion (accounting for 66% of total second-quarter revenues), which decreased 11% on a year-over-year basis.

Industrial Technologies: This segment generated revenues of $533.7 million (34% of total revenues), which declined 23.7% from the prior-year quarter.

Operating Details

In the second quarter, gross margin came in at 51.8%, which expanded 330 basis points (bps) year over year.

Total operating expenses were $623.2 million, reflecting a 4.8% year-over-year decrease. As a percentage of revenues, both selling, general & administrative expenses as well as research & development costs increased from the year-ago quarter.

Operating margin was 12.2%, which contracted 120 bps on a year-over-year basis.

Segment wise, operating margin from Professional Instrumentation came in at 13.1%, which expanded 200 bps year over year.

Industrial Technologies operating margins came in at 15.5% versus 20.7% in the year-ago quarter.

Guidance

Though the company did not provide full guidance for the third quarter, it expects total revenues to decline 5-8% on a year-over-year basis. The projection, however, indicates a sequential improvement.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates. The consensus estimate has shifted 12.16% due to these changes.

VGM Scores

At this time, Fortive has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

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

Outlook

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


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Zacks Investment Research