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FLIR Systems (FLIR) Q4 Earnings Miss Estimates, Sales Up

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FLIR Systems Inc. FLIR continued its recent trend of missing estimates, as its fourth-quarter 2016 earnings per share of 52 cents lagged the Zacks Consensus Estimate by 5.5%. A rise in operating expenses and higher interest outlay resulted in the bottom-line miss.

Net earnings for the quarter came in at $61.5 million compared with $70.2 million in the year-ago quarter. Fall in net income was largely attributable to a rise in operating expenses, which more than offset top-line growth.

For full-year 2016, net earnings fell 31.6% to $166.6 billion.

Inside the Headlines

The company's top line grew a robust 8.5% year over year to $474.7 million. Also, revenues beat the Zacks Consensus Estimate of $452 million. Strong growth in four of the company's segments drove the overall top line and more than offset the decline in sales experienced in the Instruments and Detection segment.

For the full year, sales rose 6.8% over the prior year to $16.6 million.

As for the segments, OEM & Emerging Markets revenues rose an impressive 54.9% over the prior-year quarter to $76.1 million, while Surveillance revenues recorded growth of 5.1% year over year to $158.5 million. Maritime segment revenues were also up 6.2% year over year to $38.3 million.

In addition, Instruments revenues slipped to negative growth again after charting positive growth in the preceding quarter, decreasing 2.7% year over year to $96 million. Detection segment revenues also contracted 5.8% year over year to $32.7 million.

Revenues from the Security segment returned to the growth track after a dismal performance last quarter, increasing 6.9% over the prior-year quarter to $73.1 million.

FLIR Systems' backlog of firm orders for delivery within the next 12 months came in at $592 million, reflecting a decrease of 8% from the tally at the end of year-ago quarter.

Adjusted operating income came in at $103.3 million, compared with $98.7 million in the prior-year quarter. Sturdy top-line growth drove the rise in income.

Liquidity & Cash Flow

As of Dec 31, 2016, the company's cash and cash equivalents were $361.3 million, compared with $472.8 million a year back. Long-term debt rose sharply to $501.9 million, compared with $93.8 million as at Dec 31, 2015.

Cash flow generated from operating activities in the quarter came in at $97 million, significantly higher than $78.3 million generated in the year-earlier quarter. This is the company's highest cash flow since 2013 and can be largely attributed to sustained improvements in productivity of working capital.

FLIR Systems, Inc. Price, Consensus and EPS Surprise

FLIR Systems, Inc. Price, Consensus and EPS Surprise | FLIR Systems, Inc. Quote

Dividend & Share Repurchase

Concurrent with the earnings report, FLIR Systems announced a quarterly cash dividend of 15 cents per share, which reflected a jump of 25% over the previous quarterly dividend of 12 cents per share. The dividend is payable on Mar 10, 2017, to shareholders of record as on Feb 24.

Additionally, FLIR Systems approved a new share repurchase program, authorizing the buyback of up to 15 million shares over the next two years. These shares represent around 11% of the company's outstanding common stock as of Dec 31, 2016.

Guidance

FLIR Systems released its outlook for 2017 and projects adjusted earnings to lie in the range of $1.81-$1.91 per share, on revenues of $1.78-$1.83 billion. The figures represent year-over-year growth of about 7-13% in adjusted earnings and 7-10% growth in revenues.

Going Forward

The year 2016 saw FLIR Systems expand its market share in nearly all of its served markets. The company expects to build up on the strong backlog in 2017. Also, it has several new product platforms in the pipeline, which it expects to launch in the first half of the year, which should drive further growth.

Also, the company's improved working capital utilization is resulting in robust cash flow that supplements its strength. The company is particularly optimistic about the product portfolios of all its segments and is bullish on their growth prospects.

However, the company's Instruments and Detection segments' operations are currently under pressure, which might hurt the company's operations further. Moreover, profitability of this Zacks Rank #3 (Hold) company depends on its ability to check the rise in costs during the second half of the year.

Stocks to Consider

Some better-ranked stocks in the broader sector include CAE Inc. CAE , Transdigm Group Incorporated TDG and Hexcel Corporation HXL , each carrying a Zacks rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

Defense equipment provider, CAE has a robust earnings beat history, having surpassed estimates thrice over the four trailing quarters, with an average positive surprise of 10.6%.

Transdigm Group has registered a positive average surprise of 6.6% over the four trailing quarters, beating estimates all through.

Hexcel also has a striking earnings history, having consistently beaten estimates each time in the four trailing quarters, for an average positive surprise of 6.1%.

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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 Nasdaq, Inc.


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

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