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Fortive's (FTV) Q3 Earnings Beat Estimates, Revenues Lag

Fortive Corporation FTV reported third-quarter 2020 earnings of 94 cents per share, which outpaced the Zacks Consensus Estimate of 88 cents. The figure increased 8% from the year-ago quarter and 38.2% on a sequential basis.

Revenues increased 2.3% year over year and 21.1% sequentially to $1.90 billion.

However, core revenues declined 0.1% from the year-ago quarter. Also, the top line missed the Zacks Consensus Estimate of $1.92 billion.

Top Line in Detail

Fortive operates under the following two organized segments.

Professional Instrumentation: The segment generated revenues of $1.16 billion (accounting for 61% of total third-quarter revenues), which increased 0.9% on a year-over-year basis.

Industrial Technologies: This segment generated revenues of $746.6 million (39% of total revenues), which increased 4.5% from the prior-year quarter.

Fortive Corporation Price, Consensus and EPS Surprise

Fortive Corporation Price, Consensus and EPS Surprise

Fortive Corporation price-consensus-eps-surprise-chart | Fortive Corporation Quote

Operating Details

In the third quarter, gross margin came in at 51.7%, which expanded 180 basis points (bps) year over year.

Total operating expenses were $673 million, reflecting a 1.8% year-over-year decrease. As a percentage of revenues, both selling, general & administrative expenses as well as research & development costs decreased from the year-ago quarter.

Operating margin was 16.3%, which expanded 330 bps on a year-over-year basis.

Segment wise, operating margin from Professional Instrumentation came in at 14.6%, which expanded 360 bps year over year.

Industrial Technologies operating margins came in at 22.2% versus 19.4% in the year-ago quarter.

Guidance

Though the company did not provide full guidance for the fourth quarter, it expects total revenues to increase 0-3% on a year-over-year basis. The Zacks Consensus Estimate for revenues is pegged at $1.77 billion.

Zacks Rank & Key Picks

Fortive currently has a Zacks Rank #4 (Sell). Some better-ranked stocks in the broader technology sector include ON Semiconductor Corporation ON, Silicon Laboratories, Inc. SLAB and Alibaba Group Holding Limited BABA, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Long-term earnings growth for ON Semiconductor, Silicon Laboratories, and Alibaba is currently projected at 1.3%, 15% and 19.4%, respectively.

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