Roper Posts EPS In line, Revs Miss (A) (HAL) (ROP)

Zacks

Roper Industries Inc. (ROP) reported second quarter 2012 earnings of $1.15 per share, up 6.5% year over year. The earnings per share came in line with the Zacks Consensus Estimate. The year-over-year increase was primarily driven by revenue growth and margin expansion in the quarter.

In addition, the company also announced the acquisition of Sunquest Information Systems, Inc., a provider of comprehensive suite of clinical and anatomic laboratory software solutions, for approximately $1.42 billion.

Revenue

Roper’s total revenue increased 3.5% year over year to $724.9 million in the quarter. Reported revenue failed to surpass the Zacks Consensus Estimate of $747.0 million. Acquisitions/Divestitures contributed 3.0% to the revenue growth in the quarter, while 3.0% came from organic growth, which offset the negative 2.0% impact of foreign currency fluctuations.

The year-over-year growth was driven by the revenues from Industrial Technology (up 11.2% year over year) and Energy Systems & Controls (up 6.2% year over year), which more than offset the decline in revenues from Medical & Scientific Imaging (down 0.1% year over year) and RF Technology (down 2.0% year over year).

Net orders were $763.5 million in the reported quarter, up from $707.7 million in the previous-year quarter.

Operating Performance

Gross profit rose 5.4% year over year to $397.6 million. Gross margin in the reported quarter increased to 54.9% from 53.9% in the year-ago quarter, driven by prudent revenue mix. Moreover, gross profit margin was positively impacted by margin expansions across its business segments. Gross margin for Industrial Technology, Energy Systems & Controls, Medical & Scientific Imaging and RF Technology expanded 20 basis points (bps), 50 bps, 80 bps and 240 bps, respectively.

In the reported quarter, income from operations increased 9.0% year over year to $178.8 million. The upside in operating income was based on improved sales. Operating margin improved 130 bps to 24.7% from 23.4% in the year-ago quarter.

Net income increased 8.0% year over year to $114.8 million in the quarter, with net margin climbing 60 bps year over year to 15.8%.

Balance Sheet & Cash Flow

Roper exited the quarter with $518.9 million of cash and cash equivalents and $1.07 billion of total debt (including the current portion) compared with $451.7 million of cash and cash equivalents and $1.08 billion of total debt (including the current portion) in the previous quarter. Operating cash flow was $119.0 million in the quarter versus $141.5 million in the previous quarter.

Guidance

Roper Industries upped its fiscal 2012 earnings guidance to the range of $4.84 – $5.00 per share from previous estimates of $4.75 – $4.95 per share. Currently, the Zacks Consensus Estimate for fiscal 2012 is pegged at $4.83, below the company’s guided range.

Recommendation

We believe strong backlog and improvement across segments coupled with strong organic growth are expected to drive revenues going forward. Moreover, acquisitions are expected to benefit the company in the long run. However, competition from Agilent Technologies Inc. (A) and Halliburton Company (HAL) are the near-term headwinds.

We maintain a Neutral recommendation for Roper over the long term (6-12 months). Currently, Roper has a Zacks #3 Rank, which implies a short-term Hold rating on the stock.

AGILENT TECH (A): Free Stock Analysis Report

HALLIBURTON CO (HAL): Free Stock Analysis Report

ROPER INDS INC (ROP): Free Stock Analysis Report

To read this article on Zacks.com click here.

Get all Zacks Research Reports and be alerted to fast-breaking buy and sell opportunities every trading day.

Be the first to comment

Leave a Reply