Industrial technology company Fortive (NYSE:FTV) missed Wall Street’s revenue expectations in Q4 CY2024 as sales rose 2.3% year on year to $1.62 billion. Next quarter’s revenue guidance of $1.50 billion underwhelmed, coming in 3.7% below analysts’ estimates. Its non-GAAP profit of $1.17 per share was 4.4% above analysts’ consensus estimates.
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Fortive (FTV) Q4 CY2024 Highlights:
- Revenue: $1.62 billion vs analyst estimates of $1.63 billion (2.3% year-on-year growth, 0.5% miss)
- Adjusted EPS: $1.17 vs analyst estimates of $1.12 (4.4% beat)
- Management’s revenue guidance for the upcoming financial year 2025 is $6.29 billion at the midpoint, missing analyst estimates by 3% and implying 0.9% growth (vs 2.8% in FY2024)
- Adjusted EPS guidance for the upcoming financial year 2025 is $4.06 at the midpoint, missing analyst estimates by 1.7%
- Operating Margin: 19%, in line with the same quarter last year
- Free Cash Flow Margin: 28.7%, up from 26.1% in the same quarter last year
- Organic Revenue rose 1.8% year on year, in line with the same quarter last year
- Market Capitalization: $27.7 billion
James A. Lico, President and Chief Executive Officer, stated, “Our fourth quarter results once again demonstrated strong execution despite the mixed macro environment, leading to better-than-expected core growth, earnings, and free cash flow. Continued growth in our Intelligent Operating Solutions (IOS) and Advanced Healthcare Solutions (AHS) segments was driven by steady demand for our safety and productivity solutions and increased contributions from FBS-driven product innovations. We saw strong order growth across all of our segments, including the second consecutive quarter of double-digit orders growth for our Precision Technologies (PT) segment. This momentum drove sequential improvement in PT core growth and supports our view of a gradual recovery as we move through 2025. As we look ahead, Fortive is poised for improving core sales growth and continued strong operating performance again in 2025.”
Company Overview
Taking its name from the Latin root of "strong", Fortive (NYSE:FTV) manufactures products and develops industrial software for numerous industries.
Professional Tools and Equipment
Automation that increases efficiency and connected equipment that collects analyzable data have been trending, creating new demand. Some professional tools and equipment companies also provide software to accompany measurement or automated machinery, adding a stream of recurring revenues to their businesses. On the other hand, professional tools and equipment companies are at the whim of economic cycles. Consumer spending and interest rates, for example, can greatly impact the industrial production that drives demand for these companies’ offerings.
Sales Growth
A company’s long-term sales performance can indicate its overall quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Regrettably, Fortive’s sales grew at a mediocre 6.4% compounded annual growth rate over the last five years. This was below our standard for the industrials sector and is a poor baseline for our analysis.
We at StockStory place the most emphasis on long-term growth, but within industrials, a half-decade historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. Fortive’s recent history shows its demand slowed as its annualized revenue growth of 3.4% over the last two years is below its five-year trend. 
Fortive also reports organic revenue, which strips out one-time events like acquisitions and currency fluctuations that don’t accurately reflect its fundamentals. Over the last two years, Fortive’s organic revenue averaged 3.1% year-on-year growth. Because this number aligns with its normal revenue growth, we can see the company’s core operations (not acquisitions and divestitures) drove most of its results. 
This quarter, Fortive’s revenue grew by 2.3% year on year to $1.62 billion, falling short of Wall Street’s estimates. Company management is currently guiding for a 1.9% year-on-year decline in sales next quarter.
Looking further ahead, sell-side analysts expect revenue to grow 3.8% over the next 12 months, similar to its two-year rate. This projection is underwhelming and indicates its newer products and services will not accelerate its top-line performance yet.
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Operating Margin
Fortive has been a well-oiled machine over the last five years. It demonstrated elite profitability for an industrials business, boasting an average operating margin of 16.7%. This result isn’t surprising as its high gross margin gives it a favorable starting point.
Analyzing the trend in its profitability, Fortive’s operating margin rose by 7.7 percentage points over the last five years, showing its efficiency has meaningfully improved.
In Q4, Fortive generated an operating profit margin of 19%, in line with the same quarter last year. This indicates the company’s cost structure has recently been stable.
Earnings Per Share
We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.
Fortive’s EPS grew at a weak 1.5% compounded annual growth rate over the last five years, lower than its 6.4% annualized revenue growth. However, its operating margin actually expanded during this time, telling us that non-fundamental factors such as interest and taxes affected its ultimate earnings.
We can take a deeper look into Fortive’s earnings to better understand the drivers of its performance. A five-year view shows Fortive has diluted its shareholders, growing its share count by 2.3%. This dilution overshadowed its increased operating efficiency and has led to lower per share earnings. Taxes and interest expenses can also affect EPS but don’t tell us as much about a company’s fundamentals. 
Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.
For Fortive, its two-year annual EPS growth of 11.1% was higher than its five-year trend. This acceleration made it one of the faster-growing industrials companies in recent history.
In Q4, Fortive reported EPS at $1.17, up from $0.98 in the same quarter last year. This print beat analysts’ estimates by 4.4%. Over the next 12 months, Wall Street expects Fortive’s full-year EPS of $3.90 to grow 6.2%.
Key Takeaways from Fortive’s Q4 Results
It was encouraging to see Fortive beat analysts’ EPS expectations this quarter. On the other hand, its full-year revenue and EPS guidance fell short of Wall Street’s estimates. Overall, this quarter could have been better. The stock traded down 3.6% to $77 immediately following the results.
The latest quarter from Fortive’s wasn’t that good. One earnings report doesn’t define a company’s quality, though, so let’s explore whether the stock is a buy at the current price. What happened in the latest quarter matters, but not as much as longer-term business quality and valuation, when deciding whether to invest in this stock. We cover that in our actionable full research report which you can read here, it’s free.