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Why Is Flir Systems (FLIR) Down 1.8% Since Last Earnings Report?

Zacks Equity Research

It has been about a month since the last earnings report for Flir Systems (FLIR). Shares have lost about 1.8% 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 its most recent earnings report in order to get a better handle on the important catalysts.

FLIR Systems Q4 Earnings Beat Estimates, Improve Y/Y

FLIR Systems fourth-quarter 2018 adjusted earnings of 62 cents per share surpassed the Zacks Consensus Estimate of 60 cents by 3.3%. The reported figure also increased 6.9% from 58 cents registered in the prior-year quarter.

Excluding the one-time items, the company reported GAAP earnings of 71 cents against a loss of 36 cents incurred in the year-ago quarter. The year-over-year upside was primarily driven by a $33.3 million reduction in accrued income tax as a result of the settlement of tax assessments issued by Belgium in connection with the European Commission’s 2016 decision on state aid.

The company’s 2018 adjusted earnings of $2.22 per share surpassed the Zacks Consensus Estimate of $2.21 by a penny. The reported figure also increased 18.1% from the prior-year tally of $1.88.

Inside the Headlines

FLIR Systems’ revenues declined 9.4% year over year to $448.5 million in the reported quarter. The top line also missed the Zacks Consensus Estimate of $466.7 million by 3.9%. Disappointing sales performance by the Commercial segment primarily resulted in the year-over-year decline in the top line.

Meanwhile, organic revenues remained flat when compared with the prior-year quarterly figure, excluding revenues from the previously disclosed divested security businesses.

FLIR Systems’ 2018 revenues dropped 1.4% to $1.78 billion from the prior year tally of $1.80 billion. The top line also missed the Zacks Consensus Estimate of $1.79 billion by a whisker. Organic revenue growth was 6.4%.

Segment-wise, quarterly revenues at the Industrial segment was flat year over year at $181.7 million as increased sales of cooled thermal cores, unmanned aerial systems (UAS) and automotive solutions were negatively impacted by decreased instruments and uncooled core sales.

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At the Government and Defense segment, revenues totaled $171.1 million, down 2.5% on a year-over-year basis. The downside can be attributed to revenue declines in CBRNE systems and impacts from the government shutdown.

Moreover, the Commercial segments’ revenues plunged 30.5% to $95.7 million from the year-ago period.

Adjusted operating income came in at $107.9 million compared with $111.7 million in the prior-year quarter, reflecting a 3.4% decline. Also, the company’s total operating expenses decreased 11.7% year over year to $141.9 million.

Liquidity & Cash Flow

As of Dec 31, 2018, the company's cash and cash equivalents were $512.1 million compared with $519.1 million as of Dec 31, 2017. Long-term debt summed $421.9 million, marginally up from $420.7 million on Dec 31, 2017.

Cash flow generated from operating activities at the end of 2018 amounted to $374.2 million, up 21.3% from the prior-year tally of $308.3 million.

Outlook

FLIR Systems issued its guidance for 2019. The company projects its adjusted earnings per share in the range of $2.30-$2.36 on revenues of $1.92-$1.95 billion.

Currently, the Zacks Consensus Estimate for 2019 earnings is pegged at $2.35 on revenues of $1.87 billion. While the earnings estimate comes above the company’s guidance, the same for revenues falls below the projected range.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -5.31% 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. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% 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 these revisions indicates a downward shift. 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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