Current Price: $69.9 Price Target: $86 (NEW – lowered from $91)
Position Size: 2.22% 1-year performance: -6%
Key Takeaways:
Fortive released its 3Q19 earnings, with core sales growth of 2%, thanks to high growth in its Industrial Technologies business, making up for weakness in its short-term cycle businesses. Retail fueling (gas pump upgrading to chip card reader) continues to be a bright spot globally.
The management team further reduced its 2019 guidance, lowering organic sales growth and EPS as macroeconomic trends are worse than expected and possibly could continue into 2020. We are lowering our price target to reflect weaker sales in 2019 and possible continued slowdown in early 2020. Overall we think the long-term thesis around increasing SaaS as a % of revenue and moving away from cyclical businesses is still intact.
FTV Thesis:
– Market leader:
· Leadership position in most of the markets they serve
· Experienced leadership team
· Above industry margins with strong cash flows
– Quality:
· FCF yield ~5%
· Organic growth target of 3-3.5% (4-5% in last 2 quarters after being under the target in prior quarters)
· M&A strategy to enhance top line growth
· Margins expansion from new products introduction, continued application of the Fortive Business Systems and M&A integration
– Shareholder friendly:
· Management team focused on shareholder wealth creation through top line sustainability and margin expansion
$FTV.US
[tag FTV]
Julie S. Praline
Director, Equity Analyst
Direct: 617.226.0025
Fax: 617.523.8118
Crestwood Advisors
One Liberty Square
Suite 500
Boston, MA 02109