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Will Supply-Chain Woes Dampen Roper's (ROP) Q4 Earnings?

Roper Technologies ROP is scheduled to release fourth-quarter 2022 results on Jan 27, before market open.

The company has an impressive earnings surprise history, having outperformed the Zacks Consensus Estimate in each of the preceding four quarters, the average beat being 3.5%.

Let’s see how things are shaping up for Roper this earnings season.

Roper Technologies, Inc. Price and EPS Surprise

Roper Technologies, Inc. Price and EPS Surprise
Roper Technologies, Inc. Price and EPS Surprise

Roper Technologies, Inc. price-eps-surprise | Roper Technologies, Inc. Quote

Factors to Note

Impressive performance of the Application Software segment due to strength across the Deltek, Vertafore, Aderant, CliniSys and Data Innovations businesses is likely to have aided Roper’s top line in the fourth quarter. Strength in recurring revenue stream, led by strong customer retention and continued migration to SaaS delivery models, is expected to have driven the segment’s performance. For the fourth quarter, ROP expects segmental organic growth of 6-8%.

The Zacks Consensus Estimate for Application Software segment revenues in the fourth quarter indicates an 11.3% improvement from the third-quarter reported figure. We expect Application Software revenues to increase nearly 1% from the sequential quarter’s reported figure and 7.2% from the year-ago reported number.

The Network Software segment is expected to reflect higher revenues on the back of strong performance of the U.S. and Canadian freight matching businesses, as well as strength across the Foundry business, owing to solid innovation capability. For the fourth quarter, ROP expects segmental organic growth of 8-10%.

The consensus mark for Network Software segment revenues in the fourth quarter suggests a 1.4% increase from the previous quarter’s reported figure. We expect segmental revenues to inch up 0.8% from the third-quarter reported number and 8.3% from the fourth quarter of 2021 reported figure.

The Frontline acquisition, which builds on Roper’s Horizon software business, expanding its presence in the K-12 education market, is expected to have boosted the company’s top line in the to-be-reported quarter. For the fourth quarter, the company anticipates earnings per share of $3.72-$3.76.

However, raw material cost inflation and supply-chain constraints are likely to have dented Roper’s bottom-line performance. Supply-chain disruptions are weighing on demand and ordering activity at the Verathon and Northern Digital business within the Technology Enabled Products segment. This is likely to have affected segmental revenues in the fourth quarter. The Zacks Consensus Estimate for Technology Enabled Products segment revenues in the fourth quarter hints at a 31.1% drop from the sequential quarter’s reported figure.

Given Roper’s considerable exposure to overseas markets, adverse foreign currency movements might have impacted the top line.

What Does the Zacks Model Say?

Our proven model does not conclusively predict an earnings beat for Roper this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of beating estimates, which is not the case here, as elaborated below. You can see the complete list of today’s Zacks #1 Rank stocks here.

Earnings ESP: Roper has an Earnings ESP of 0.00% as both the Most Accurate Estimate and the Zacks Consensus Estimate are pegged at $3.77. You can uncover the best stocks with our Earnings ESP Filter.

Zacks Rank: Roper presently carries a Zacks Rank #2.

Highlights of Q3 Earnings

Roper’s third-quarter 2022 adjusted earnings of $3.95 per share surpassed the Zacks Consensus Estimate of $3.67. However, on a year-over-year basis, earnings declined 6.1%. Net revenues of $1,350.3 million beat the Zacks Consensus Estimate of $1,328 million. The top line increased 9.6% year over year. Organic sales in the quarter increased 10%, owing to strength across each of the three segments.

Stocks to Consider

Here are some companies you may want to consider from the Zacks Computer and Technology sector, as our model shows that these have the right combination of elements to post an earnings beat this season:

Lam Research LRCX has an Earnings ESP of +0.42% and a Zacks Rank #3. The company is scheduled to release second-quarter fiscal 2023 (ended December 2022) results on Jan 25.

The Zacks Consensus Estimate for Lam Research’s fiscal second-quarter earnings has remained steady in the past 60 days. The company pulled off a trailing four-quarter earnings surprise of 7.4%, on average.

AMETEK AME has an Earnings ESP of +0.68% and a Zacks Rank #3. The company is set to release fourth-quarter results on Feb 2.

The Zacks Consensus Estimate for AMETEK’s fourth-quarter earnings has remained steady in the past 60 days. The company delivered a four-quarter earnings surprise of 5.5%, on average.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.

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Roper Technologies, Inc. (ROP) : Free Stock Analysis Report

Lam Research Corporation (LRCX) : Free Stock Analysis Report

AMETEK, Inc. (AME) : Free Stock Analysis Report

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