Release Date: October 30, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Fortive Corp (FTV, Financial) delivered strong third-quarter results with 14% adjusted EPS growth and 12% free cash flow growth on 3% revenue growth.
- The company reported double-digit orders growth in its Precision Technologies segment, indicating positive momentum.
- Advanced Healthcare Solutions expanded adjusted operating margins by over 300 basis points on 8% revenue growth, driven by strong capital and equipment sales.
- Fortive Corp (FTV) accelerated its share repurchase program, buying back approximately 4 million shares in the third quarter.
- The company is on track with its plan to spin off the Precision Technologies segment, which is expected to enhance shareholder value.
Negative Points
- Revenue in the Precision Technologies segment was flat with a core decline of almost 4%, indicating challenges in this area.
- The company experienced shipment delays, shifting approximately $15 million in shipments out of the quarter.
- There were customer spending delays, particularly among Gordian state and local customers facing budget and macroeconomic uncertainties.
- Growth in Asia was impacted by weak demand in China, with revenue down high single digits in the region.
- Fortive Corp (FTV) anticipates ongoing geopolitical and macro uncertainties, which could affect future performance.
Q & A Highlights
Q: Can you confirm the expected core growth rates for each segment in Q4?
A: Yes, for the fourth quarter, AHS is expected to grow mid- to high single digits, PT is anticipated to be down low single digits, and IOS is projected to grow low single digits. (Elena Rosman, VP of Investor Relations)
Q: How is the direct sales strategy impacting AHS, and are there any effects from IV shortages?
A: The direct sales strategy is positively impacting capital sales, with ASP showing mid-single-digit capital growth. Provation's SaaS growth is strong, though IV shortages have caused a slight headwind in October. (James Lico, CEO)
Q: What are the near-term dynamics within the IOS segment, particularly for Fluke and FAL?
A: Fluke saw low single-digit growth in its IG business, but calibration customers showed hesitation due to government uncertainty. FAL experienced good SaaS growth, but procurement was affected by government spending hesitancy. (James Lico, CEO)
Q: Can you provide initial thoughts on 2025 growth expectations across segments and tax rate changes?
A: We expect organic growth in all three segments with strong incremental margins. The tax rate is expected to increase from 11% to between 13% and 15%. (Charles McLaughlin, CFO)
Q: What is the outlook for EA given current market conditions?
A: EA is positioned well within its markets, but recovery is expected in the back half of next year into 2026, with proactive restructuring underway to address current challenges. (James Lico, CEO)
Q: How is the share repurchase strategy being executed, and are there any cash constraints?
A: We are executing share repurchases equating to 75% of projected free cash flow, with plans to catch up in Q4. There are no stranded cash issues. (Charles McLaughlin, CFO)
Q: What are the expectations for Tektronix orders and revenue trends?
A: Tektronix orders are inflecting positively, with growth expected to impact revenue by late Q1 or early Q2 2025, depending on budget outcomes and global uncertainties. (James Lico, CEO)
Q: Can you elaborate on the proactive restructuring efforts and expected payback?
A: The restructuring is targeted at specific areas with expected payback within the first year, potentially sooner. (Charles McLaughlin, CFO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
