Fortive Corporation
CEO : Mr. James A. Lico
Quarterly earnings growth(YoY,%)
| Period | Revenue | Operating Income | EPS | Release Date |
|---|---|---|---|---|
| 2022 Q4 | 11.2% YoY | 43.5% | 39.1% | 2023-02-01 |
Jim Lico says,
Strong Q4 Results
- 14% core revenue growth
- 50 and 110 basis points of adjusted gross and operating margin expansion, respectively
- 11% adjusted earnings per share growth
- 62% free cash flow growth
- Performance driven by team members’ dedication and the Fortive Business System
Portfolio Transformation
- Core growth of 10% and 20% on a two-year stack basis
- 1,000 basis points of gross margin expansion since 2016
- Free cash flow growth of $1.2 billion, with margins approaching 21%
Intelligent Operating Solutions
- 13% core revenue growth and 330 basis points of core operating margin expansion
- Double-digit growth in every workflow
- EMEA SaaS revenue grew by high teens with strong contributions from both Industrial Scientific and Intelex
Precision Technologies
- 20% core revenue growth driven by high teens growth in North America and >20% growth in Western Europe and China
- 240 basis points of adjusted operating margin expansion
- Record quarterly revenues and operating profit at Tektronix
Advanced Healthcare Solutions
- 5% revenue growth driven by broad improvement across all healthcare operating companies
- Margins impacted by higher inflation, partially offset by favorable M&A
- Provations contributed $0.10 to earnings in 2022
Fortive Business System
- Significant improvements in growth, margin, free cash flow, and breakthrough innovations across four operating companies
- Kaizen activity accelerating in 2023
Chuck McLaughlin says,
Revenue Growth and Geographical Performance
- Year-over-year core revenue growth was 14%, with acquisitions net of divestitures contributing 1.5 points of growth and FX headwinds of approximately four points.
- North America revenue was up low double-digits with broad-based strength across businesses, Western Europe revenue grew mid-teens, Asia revenue increased high-teens, and high-growth markets with mid-teens core growth.
Operating Performance Highlights
- Adjusted gross margins increased by 50 basis points to 58.3%, and adjusted operating profit margins expanded 110 basis points to 25.5%, up 230 basis points on a two-year stack basis.
- Adjusted earnings per share increased 11% to $0.88, reflecting a strong fall-through on higher volumes and productivity, partially offset by higher interest and tax expense.
- Free cash flow was $428 million in the quarter, taking the full year to $1.2 billion.
2023 Outlook
- Expecting 2023 to be another year of growth and margin expansion, with double-digit SaaS and license revenue growth, derisked moderating demand, above-trend pricing realization, increased sourcing and value engineering savings contributing to gross margin expansion, and strong productivity initiatives yielding incremental operating margins.
2023 Guidance
- Expecting core revenue growth of 3% to 5.5% for the full year, with foreign exchange headwind of just under 1% on revenue.
- Adjusted operating profit to increase 5% to 10%, with margins in the range of 25% to 25.5%.
- Adjusted diluted net EPS guidance of $3.25 to $3.40, up 3% to 8%, which includes higher interest and tax expense.
- Free cash flow expected to be approximately $1.25 billion, representing conversion in the range of 100% to 105% of adjusted net income and a 21% free cash flow margin.
Q & A sessions,
Expectation for slowing growth in 2023
- Anticipation for slowing growth as customer demand normalizes after two years of robust double-digit hardware product orders.
- Expect orders to be around the same in the first half relative to those product businesses.
- Backlog in and around where it was thought it would be from an ending year.
Benefits of investment in accelerating strategy and software revenue
- Outlook reflects benefits of investments made to accelerate strategy, strengthen market position, scale software revenues and develop new innovations.
- Investments helping to solve customers’ toughest safety, quality and productivity challenges.
- Continuous improvement culture and Fortive Business System delivering more profitable growth and strong free cash flow, allowing for disciplined capital deployment.
AHS margin improvement in 2023
- Expect North America to be good and resilient for AHS.
- More price realization in the fourth and into the year.
- Leadership team has adopted FBS and embraced actions to drive productivity.
Regional outlook for customer demand in 2023
- North America expected to be resilient; most software businesses have the predominance of their revenue streams in North America.
- Western Europe and Europe more broadly expected to be weaker.
- China expected to be good all year; healthcare will be weak in China in the first quarter but should continue to improve throughout the year.
Expectation for moderation in order growth
- Moderation or normalization back to mid-single-digit growth after 40% order growth over the last couple of years.
- Expect orders to slow a little bit, but some of that is just the big heavy comps that have been experienced over the last couple of years.
No bad stock 