Flir Systems (FLIR) Down 4.7% Since Last Earnings Report: Can It Rebound?

A month has gone by since the last earnings report for Flir Systems (FLIR). Shares have lost about 4.7% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Flir Systems due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

FLIR Systems Q2 Earnings & Revenues Beat Estimates

FLIR Systems’ second-quarter 2019 adjusted earnings of 56 cents per share surpassed the Zacks Consensus Estimate of 55 cents by 1.8%. Also, the reported figure increased 1.8% from 55 cents in the prior-year quarter.

The company reported GAAP earnings of 34 cents per share compared with 51 cents in the year-ago quarter.

Inside the Headlines

FLIR Systems’ revenues increased 6.5% year over year to $482 million in the reported quarter. Also, the top line beat the Zacks Consensus Estimate of $480 million by 0.42%. Impressive performance by the Government and Defense segment, and the Industrial segment led to year-over-year increase in the top line.

Organic revenues rose 2.6% year over year. The figure excluded revenues from the acquisitions of Endeavor Robotics and Aeryon Labs in the first quarter of 2019 and the same from the security businesses divested in the second quarter of 2018.

Segment-wise, quarterly revenues in the Industrial segment were up 0.3% to $188.9 million. The upside can be attributed to higher sales of cooled thermal cores.

Revenues in the Government and Defense segment totaled $197.5 million, up 22.7% on a year-over-year basis. The upside can be attributed to strong growth in all major product lines, led by strength in unmanned systems and solutions, including revenues from the acquisitions of Aeryon Labs and Endeavor Robotics.

Moreover, the Commercial segments’ revenues amounted to $95.6 million, down 7.4% from the year-ago quarter’s figure. The downside was caused by the slow Maritime market, restructuring impact on the Outdoor and Tactical Systems business (OTS), and continued negative impact of foreign exchange.

The company’s total operating expenses increased 18% year over year to $169.9 million. Consequently, adjusted operating income came in at $101.8 million, which was in line with that in the second quarter of 2018.

Liquidity & Cash Flow

As of Jun 30, 2019, the company’s cash and cash equivalents were $268.9 million compared with $512.1 million as of Dec 31, 2018. Long-term debt totaled $654.9 million, up from $421.9 million as of Dec 31, 2018.

Cash flow from operating activities for the six months ended Jun 30, 2019, amounted to $121.5 million, down 20.7% from $153.3 million in the first half of 2018.

Outlook

FLIR Systems continues to expect 2019 adjusted earnings per share of $2.30-$2.36 on revenues of $1.92-$1.95 billion. The company also continues to expect 2019 adjusted operating income margin to be 22-23%.

Currently, the Zacks Consensus Estimate for 2019 earnings and revenues is pegged at $2.37 and $1.93 billion, respectively. Both earnings and revenue estimates lie within the company’s guided range.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended downward during the past month. The consensus estimate has shifted -5.38% due to these changes.

VGM Scores

Currently, Flir Systems has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. Following the exact same course, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of this revision has been net zero. Notably, Flir Systems has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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