Fortive (FTV) Q1 Earnings and Revenue Beat Estimates, Up Year-on-Year – April 29, 2022

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Fortive Corporation (FST Free Report) reported adjusted earnings of 70 cents per share in the first quarter of 2022, beating Zacks’ consensus estimate by 2.9%. The figure also increased by 11% year-on-year.

Revenue grew 9% year-over-year to $1.377 billion and beat Zacks’ consensus estimate by 2%. Additionally, base revenue was up 5.3% from year-ago quarter levels.

Revenue was driven by strong customer demand trends and synergies from acquisitions amid ongoing supply chain issues and the reimposition of lockdown in some parts of the world. The high demand for software-enabled workflow offerings has driven mid-teens growth for software companies.

Following the announcement, the shares fell 1.4% in the secondary market on April 28. Over the past year, Fortive shares have lost 17.2% of their value against a 12.4% decline in the industry.

Top Line in detail

Fortive operates in the following three organized segments.

Intelligent operating solutions: The segment generated revenue of $588 million (contributing to 42.7% of total revenue in the first quarter), up 15% year-over-year.

Precision technologies: This segment generated revenues of $462 million (33.6% of total revenues), up 3.4% from year-ago quarter levels.

Advanced healthcare solutions: This segment generated revenues of $327 million (23.7% of total revenues), up 8.5% from year-ago quarter levels.

Operation details

For the quarter under review, the adjusted gross margin was 57.6%, which increased by 60 basis points (bps) year-on-year.

Total operating expenses were $579.7 million, up 12.7% year over year. As a percentage of revenue, selling, general and administrative expenses were 34.9%, up 90 basis points year-over-year. Research and development expense, as a percentage of revenue, increased 40 basis points year over year to 7.2%.

Adjusted operating margin was 23%, up 30 basis points year-on-year.

By segment, Intelligent Operating Solutions adjusted operating margin was 27.2%, down 145 basis points year-on-year.

Precision Technologies adjusted operating margins of 22.7% increased 30 basis points year over year. Advanced Healthcare Solutions adjusted operating margins of 23.3% increased 160 basis points.

Balance sheet and cash flow

As of March 31, 2022, cash and cash equivalents were $684.3 million, compared to $819.3 million as of December 31, 2021.

Accounts receivable were $929 million in the current quarter, compared to $930.2 million in the prior quarter.

The company generated operating cash flow of $214.8 million, compared to $287 million in the prior quarter.

Free cash flow was $196 million, compared to $265 million in the prior quarter.

Orientation

For the second quarter of 2022, management expects adjusted net earnings in the range of 70 to 73 cents per share. The corresponding Zacks consensus estimate for the quarter is set at 75 cents per share.

Revenue is expected to be between $1.385 billion and $1.425 billion. The corresponding Zacks consensus estimate for the quarter is set at $1.44 billion. For the quarter, the company expects adjusted operating margin to be around 23%. Free cash flow is expected to be $260 million.

For 2022, Fortive expects adjusted net earnings of between $3.04 and $3.13 per share. Zacks consensus estimate for the same is pegged at $3.09 per share.

Revenue is expected to be between $5.765 billion and $5.875 billion, compared to earlier guidance of $5.725 billion to $5.875 billion. The corresponding Zacks consensus estimate for the quarter is set at $5.78 billion.

For 2022, the company expects an adjusted operating margin of around 24%. Free cash flow is expected to be between $1.16 billion and $1.2 billion.

Zacks Ranking and Other Stocks to Consider

Currently, Fortive has a Zacks rank of #3 (Hold).

Some higher ranked stocks in the broader tech sector are Flex (FLEX free report), Jabil (JBL free report) and Broadcom (AVGO free report). Jabil sports a Zacks rank of #1 (strong buy), while Flex and Broadcom carry a Zacks rank of 2 (buy). You can see the full list of today’s Zacks #1 Rank stocks here.

Zacks’ consensus estimate for Flex’s fiscal 2022 earnings is pegged at $1.88 per share, unchanged for the past 60 days. The long-term earnings growth rate is set at 14.9%.

Flexible earnings have exceeded the Zacks consensus estimate for the past four quarters, averaging 25.6%. Shares of FLEX are down 2.8% over the past year.

Zacks’ consensus estimate for Jabil’s fiscal 2022 earnings is pegged at $7.25 per share, up 10.2% over the past 60 days. The long-term earnings growth rate is 12%.

Jabil’s earnings have exceeded the Zacks consensus estimate for the past four quarters, averaging 13.5%. JBL shares have gained 13.3% over the past year.

Zacks’ consensus estimate for Broadcom’s fiscal year 2022 earnings is pegged at $35.67 per share, up 7.5% over the past 60 days. AVGO’s long-term earnings growth rate is set at 14.5%.

Broadcom’s earnings have exceeded the Zacks consensus estimate for the past four quarters, averaging 1.9%. AVGO shares are up 26.9% over the past year.

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