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Fortive's (FTV) Q3 Earnings and Revenues Miss Estimates

Fortive CorporationFTV reported third-quarter 2018 earnings of 86 cents per share, missing the Zacks Consensus Estimate by a couple of cents. The figure increased 11.7% from the year-ago quarter but decreased 5.5% on a sequential basis. The figure was within management's guided range of 83-87 cents.

Revenues increased 9.2% year over year but decreased 0.9% sequentially to $1.84 billion. The figure missed the Zacks Consensus Estimate of $1.86 billion.

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

However, core revenues grew 3.2% from the year-ago quarter, which can be primarily attributed to strong momentum across all its platforms.

During the third quarter, the company closed the Gordian and Accruent buyouts. In addition, it closed the divestiture of the automation and specialty businesses to Altra.

We note that shares of Fortive have returned 5.5% on a year-to-date basis against the industry 's loss of 9.9%.

Top Line in Detail

Fortive operates under the following two organized segments.

Professional Instrumentation: The segment generated $894.1 million revenues (48.6% of total third-quarter revenues), which increased 13.6% on a year-over-year basis. Core revenues contributed 1.4%. Acquisitions contributed 1,320 basis points (bps) while unfavorable currency impacted growth by 100 bps.

Industrial Technologies: This segment generated $946 million revenues (51.4% of the total revenues), which improved 5.3% from the prior-year quarter. Acquisitions contributed 200 bps, while favorable exchange rate impacted growth by 150 bps on a year-over-year growth basis.

Operating Details

In the third quarter, gross margin came in at 50.2%, which expanded 40 bps year over year.

Total operating expenses were $602.9 million, reflecting an increase of 24.9% year over year. 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 17.5%, which contracted 370 bps on a year-over-year basis. Segment wise, operating margin for Professional Instrumentation came in at 20.1%, which contracted 270 bps year over year.

Industrial Technologies operating margins came in at 21.1%, which contracted 80 bps from the year-ago quarter.

Cash Flow

Fortive generated $351.8 million of free cash flow in the third quarter.

Guidance

For the fourth quarter of 2018, management expects adjusted net earnings in the range of 83-87 cents per share. The Zacks Consensus Estimate for the quarter is pegged at 92 cents per share.

For 2018, Fortive expects adjusted net earnings in the range of $2.98-$3.02 per share. The Zacks Consensus Estimate is pegged at $3.46 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 EVINE Live EVLV , IAC/InterActiveCorp IAC and AMETEK, Inc. AME . While EVINE Live sports a Zacks Rank #1 (Strong Buy), both IAC/InterActiveCorp and AMETEK 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 EVINE Live, IAC/InterActiveCorp and AMETEK is currently pegged at 3%, 15% and 10.97%, respectively.

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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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