FLIR Systems Inc. (FLIR) reported second-quarter 2014 adjusted earnings (excluding one-time items) of 33 cents, which fell short of the Zacks Consensus Estimate of 35 cents by 5.7%. Earnings were also below the prior-year earnings of 35 cents. However, following the earnings release, the company’s shares gained 0.09% by Friday’s close.
The company reported GAAP earnings of 31 cents, which fell short of last year’s earnings of 35 cents.
Although quarterly results benefitted from double-digit growth in commercial segments and an improved overall backlog, this was partially offset by weak performance in some of the company’s business segments.
Revenues
Total revenue came in at $369.4 million in the reported quarter, down 5% year over year. The decline was primarily attributable to weakness in government-funded businesses, which was partially offset by higher sales in the commercial business. Revenues surpassed the Zacks Consensus Estimate of $367 million.
FLIR's backlog stood at about $514 million as of Jun 30, 2014, marking an increase of $24 million from the prior-year quarter.
Operational Update
The Surveillance segment consists of the company’s Surveillance business and the Integrated System segment. Revenues at the segment declined marginally to $105.8 million down 28% compared to the prior-year quarter.
The Instruments segment comprises the Thermography and Test and Measurement business, which finds use in commercial and industrial markets. The segmental revenues came in at $84.0 million, highlighting an increase of 5% versus the second quarter of 2013.
The Original Equipment Manufacturer (OEM) and Emerging Markets segment includes OEM Personal Vision Systems, mobile accessories and intelligent traffic solutions lines of business. Revenues increased to $59 million which was up 21.3% million compared to the prior-year quarter.
The Maritime segment, encompassing Raymarine and FLIR-branded maritime thermal imaging products, reported revenues of $55.2 million. This marks an increase of 1% compared to the second-quarter 2013.
The Security segment includes Lorex consumer security cameras and the FLIR-branded professional thermal and visible security products. The segment’s revenues grew a robust 30% to $44.7 million.
The Detection segment includes the company’s Detection business as well as detection-oriented programs of the Integrated Systems business. The reported revenues of $20.7 million declined 12% compared to the prior-year quarter.
Income and Expenses
Operating income in the reported quarter stood at $59.4 million compared with $70.3 million in the prior-year quarter. Selling and general expenses increased to $83.5 million from last year’s figure of $80.2 million. Research and development expenses declined nearly 8% to $36.3 million year over year.
Balance Sheet & Cash Flow
Exiting the quarter, the company's cash and cash equivalents improved significantly to $602.1 million from $542.5 million at 2013-end. Long-term debt stood at $365.2 million, compared with $372.5 million at the end of 2013.
Cash flow from operations declined to $70.6 million from nearly $135 million in the comparable year-ago quarter.
Business Outlook
FLIR Systems is positive about the long-term benefits of its restructuring activities. Also, it plans to boost its business by increasingly marketing its products. The company is also positive about the scope of its upcoming Lepton micro thermal camera core-enabled products that are also lower in costs.
Along with the earnings release, management reaffirmed its guidance for 2014. FLIR expects revenues in 2014 to be in the range of $1.45–$1.55 billion and earnings (excluding restructuring charges associated with the business realignment) in the band of $1.40–$1.50 per share.
FLIR Systems currently has a Zacks Rank #3 (Hold). Some better ranked companies in the sector include Teledyne Technologies Inc. (TDY), Triumph Group, Inc. (TGI) and CLARCOR Inc. (CLC). All three carry a Zacks Rank #2 (Buy).
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