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Fortive (FTV) Beats Q4 Earnings Estimates, Lags Revenues

Zacks Equity Research

Fortive Corporation FTV reported fourth-quarter 2018 earnings of 91 cents per share, surpassing the Zacks Consensus Estimate of 86 cents. Moreover, the figure increased 10% from the year-ago quarter and 5% on a sequential basis.

Revenues also increased 11.4% year over year to $1.76 billion. However, the figure missed the Zacks Consensus Estimate by 0.14%.

The year-over-year revenue increase was driven by strong growth across sensingand transportation technologies, as well as Fluke and Industrial Scientific.

Core revenues grew 7.4% from the year-ago quarter, which can be primarily attributed to strong momentum across all its platforms.

The company closed the Gordian and Accruent buyouts during the year. In addition, it closed the divestiture of the automation and specialty businesses to Altra.

Notably, shares of Fortive have returned 7.7% in the past year compared with its industry’s gain of 5.5%.

Top Line in Detail

Fortive operates under the following two organized segments.

Professional Instrumentation: The segment generated $1.0 billion revenues (56.9% of total fourth-quarter revenues), which increased 14% on a year-over-year basis. Core revenues contributed 5.2% to the total revenues. Acquisitions contributed 1,020 basis points (bps) to the top line, while unfavorable currency impacted top-line growth by 140 bps.

Industrial Technologies: This segment generated $757.2 million revenues (43.1% of the total revenues), which improved 8.1% from the prior-year quarter. Core revenues contributed 10.3% to the top line, while favorable exchange rate impacted top-line growth by 230 bps on a year-over-year basis.

Operating Details

In the fourth quarter, gross margin came in at 51.1%, which contracted 50 bps year over year.

Total operating expenses were $603.8 million, reflecting a18.7% year-over-year increase. As a percentage of revenues, selling, general &administrative (SG&A) expenses increased, while research & development expenses remained unchanged from a year ago.

Operating margin was 16.8%, which contracted 250 bps on a year-over-year basis. Segment wise, operating margin for Professional Instrumentation came in at 16.1%, which contracted 550 bps year over year.

Industrial Technologies operating margins came in at 20.5%, which expanded 110 bps from the year-ago quarter.

Balance Sheet

At the end of the fourth quarter, Fortive’s cash & cash equivalents, and marketable securities were around $1.18 billion.

Guidance

For the first quarter of 2019, management expects adjusted net earnings in the range of 64-68 cents per share. The corresponding Zacks Consensus Estimate for the quarter is pegged at 82 cents per share.

For 2019, Fortive expects adjusted net earnings in the range of $3.40-$3.50 per share. The Zacks Consensus Estimate for the same is pegged at $3.62 per share.

Fortive Corporation Price, Consensus and EPS Surprise

Fortive Corporation Price, Consensus and EPS Surprise | Fortive Corporation Quote

Zacks Rank & Stocks to Consider

Fortive currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the broader technology sector are Twitter TWTR, AMETEK, Inc. AME and Inphi Corporation IPHI. While Twitter sports a Zacks #1 Rank (Strong Buy), AMETEK and Inphi both carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here .

Long-term earnings growth rate for Twitter, AMETEK and Inphi is projected to be 11.5%, 11.2% and 18.5%, respectively.

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