Roper Industries (ROP) Buys Two Medical Solution Providers - Analyst Blog


Roper Industries Inc. ( ROP ) recently acquired two medical solution providers namely Strategic Healthcare Programs (SHP) and Innovative Product Achievements (IPA) for an unknown amount.

Santa Barbara-based SHP's Software-as-a-Service (SaaS)-based analytics platform delivers software and informatics solutions to more than 3000 post-acute healthcare organizations. Suwanee-based IPA manufactures automated surgical scrub dispensing equipment for more than 650 hospitals throughout North America.

Roper Industries plans to integrate both the companies into the Medical & Scientific Imaging segment. The company expects the acquisitions to contribute meaningfully to 2015 earnings.

Of late, Roper Industries has been actively pursuing strategic acquisitions. In July, the company acquired Los Gatos-based FoodLink and integrated it within its subsidiary iTradeNetwork, its leading SaaS solution provider to the global food and beverage supply chain.

The combination will help Roper Industries to leverage FoodLink's strengths in warehouse management, food safety and traceability solutions in the long run. Per Roper Industries, the merger created the industry's largest end-to-end supply chain data, commerce and traceability company.

Over the years, acquisitions have been an integral part of Roper Industries' growth story. In 2013, the company completed the acquisition of Managed Health Care Associates (MHA) for $1.0 billion. The company also bought 100% shares of Advanced Sensors, Ltd for $54 million in cash.

In 2012, Roper Industries acquired six businesses for $1.47 billion. In the ongoing third quarter, the company has spent $303 million on acquisitions. However, this has negatively impacted its asset quality and debt levels. As of Jun 30, 2014, goodwill and intangible assets were $6.52 billion or 79% of total assets. Total debt was $2.34 billion at the end of the second quarter.

Nevertheless, Roper Industries has a superior track record of acquiring high-margin businesses, particularly companies providing medical solutions. Successful integration of   the acquisitions has contributed meaningfully to top-line and margin growth. In 2013, acquisitions contributed 7% of revenue growth and 8% of order growth.

In the recently concluded second quarter, acquisitions contributed 5% of both revenue and order growth. Revenues increased 13% year over year to $885.2 million, which comfortably beat the Zacks Consensus Estimate of $874.0 million. We believe that Roper Industries will continue to pursue strategic acquisitions that will not only boost its product portfolio and market share but also profitability.

Accretive acquisition along with a strong backlog will help Roper Industries to face growing competition from Danaher Corp. ( DHR ), Dover Corp. ( DOV ) and Ingersoll-Rand Plc ( IR ) over the long run.

Currently, Roper has a Zacks Rank #2 (Buy).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , Business , Stocks

Referenced Stocks: DHR , DOV , ROP , IR

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