Roper (ROP) Lags On Q2 Earnings & Sales, Cuts 2016 View

Roper Technologies, Inc. (NYSE:ROP) reported second-quarter 2016 adjusted earnings per share of $1.56, falling short of the Zacks Consensus Estimate of $1.61. Earnings also decreased 8.2% year over year.

Revenues of $931.6 million were up 4.7% year over year but fell short of the Zacks Consensus Estimate of $959 million. Net orders increased 9% year over year to $956 million in the quarter.

Segment Revenue Details

Revenues from Medical & Scientific Imaging increased 12.7% year over year to $340.6 million.

Revenues from RF Technology went up 13% from the year-ago quarter to $288.8 million.

Revenues from Industrial Technology however decreased 4.2% year over year to $178.6 million.

Also, revenues from Energy Systems & Controls declined nearly 15% year over year to $123.6 million.

Margins

Adjusted gross margin increased 90 basis points (bps) to 61%. The company reported operating margin of 30.3%, which declined 110 bps year over year.

Balance Sheet and Cash Flow

Roper Technologies ended the quarter with approximately $622.3 million in cash and equivalents compared with $778.5 million as on Dec 31, 2015. Long-term debt was $3.1 billion compared with $3.3 billion at the end of 2015.

In the quarter, the company’s cash flow was $169.7 million while free cash flow was $160.9 million.

Guidance

For the third quarter of 2016, Roper Technologies expects adjusted earnings per share in the range of $1.59 - $1.63.

For 2016, the company has lowered its adjusted earnings per share outlook to a range of $6.57 - $6.71 from the earlier projection of $6.85 - $7.15 per share. The company cited global macroeconomic headwinds, weakness in the energy end markets and delays in toll & traffic projects as the reasons for the muted outlook.

Our Take

Though Roper’s business benefited from acquisitions and strength in its medical, application software and water businesses in the quarter, the growth was lower than expected. This was due to volatility in the oil and gas market, which continued to impact its Energy and Industrial segments. Unexpected delays in traffic projects also acted as a speed-breaker. We expect these headwinds to continue for the rest of the year.

Nonetheless, the company has a strategic business model, which when combined with a healthy product mix and robust M&A activity is likely to drive growth in the long run.

Currently, Roper has a Zacks Rank #3 (Hold). Better-ranked stocks in the broader tech space include LivePerson Inc. (NASDAQ:LPSN) , Blucora, Inc. (NASDAQ:BCOR) and EVINE Live Inc. (NASDAQ:EVLV) . All three stocks carry a Zacks Rank #2 (Buy).

ROPER INDS INC Price, Consensus and EPS Surprise

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