Why Is Fortive (FTV) Down 4.7% Since Last Earnings Report?

It has been about a month since the last earnings report for Fortive (FTV). Shares have lost about 4.7% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Fortive due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Fortive’s Q1 Earnings Beats Estimates, Revenues Miss

Fortive Corporation reported first-quarter 2020 earnings of 74 cents per share, outpacing the Zacks Consensus Estimate by 2 cents. The figure increased 7.2% from the year-ago quarter but decreased 28.2% on a sequential basis.

Revenues increased 7.6% year over year but decreased 14.4% sequentially to $1.7 billion. Also, core revenues declined 3.8% from the year-ago quarter.

In addition, the top line missed the Zacks Consensus Estimate of $1.83 billion due to the impacts of COVID-19 pandemic.

Top Line in Detail

Fortive operates under the following two organized segments.

Professional Instrumentation: The segment generated revenues of $1.1 billion (64.5% of total first-quarter revenues), which increased 13% on a year-over-year basis. The increase was driven by contributions from acquisitions.

Industrial Technologies: This segment generated revenues of $609.1 million (35.5% of total revenues), which declined 1% from the prior-year quarter.

Operating Details

In the first quarter, gross margin came in at 51.1%, which expanded 10 basis points (bps) year over year.

Total operating expenses were $670.9 million, reflecting a 12.7% year-over-year increase. As a percentage of revenues, selling, general & administrative expenses increased from the year-ago quarter, while research & development costs decreased slightly.

Operating margin was 7%, which contracted 660 bps on a year-over-year basis.

Segment wise, operating margin from Professional Instrumentation came in at 13.1%, which contracted 150 bps year over year.

Industrial Technologies operating margins came in at (0.2%) versus 16.1% in the year-ago quarter.

Guidance

The company did not provide any guidance for the June quarter due to risks and uncertainties related to the COVID-19 crisis.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended downward during the past month. The consensus estimate has shifted -38.02% due to these changes.

VGM Scores

At this time, Fortive has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. It's no surprise Fortive has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.

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