On Thursday, Baird reiterated its Outperform rating on Fortive Corporation (NYSE:FTV) with a price target of $85.00. The firm's positive outlook is based on Fortive's strategic decision to spin off its Precision Technologies segment.
This move is expected to simplify Fortive's business portfolio, making it more appealing to investors and potentially reducing sales volatility. The spin-off is also anticipated to enhance the core growth of Fortive's portfolio while maintaining a strong margin trajectory, especially with the expected ramp-up of Advanced Health Solutions (AHS) margins.
Fortive's strategic focus remains on productivity, safety, and reliability workflows, which are key themes that Baird believes will continue to resonate with the market. In the near term, Baird suggests that Fortive's share repurchase program should offer additional support as the company's end markets begin to recover. Looking further ahead, the firm anticipates a more balanced capital allocation priority for Fortive.
The timing of the deal is also highlighted as potentially advantageous. Baird posits that handing off the Precision Technologies segment could coincide with a period of firm recovery for the business by the end of 2025, which could be beneficial for Fortive.
In closing, Baird's analysis suggests continued confidence in Fortive's strategic decisions and market position, with more detailed insights expected to be shared following the company's next conference call.
In other recent news, Fortive Corporation announced plans to spin off its Precision Technologies segment into a new independent public company, NewCo, expected to be completed in the fourth quarter of 2025. This move is part of Fortive's strategy to emphasize its Intelligent Operating Solutions and Advanced Healthcare Solutions segments.
Leadership changes will accompany the spin-off, with Olumide Soroye stepping into the role of President and CEO of Fortive, and Tami Newcombe becoming President and CEO of NewCo.
In addition, Fortive's Advanced Sterilization Products division, in partnership with PENTAX Medical, announced the FDA clearance of its new ULTRA GI™ Cycle for the STERRAD™ 100NX Sterilizer with ALLClear™ Technology, a significant development in duodenoscope reprocessing.
Fortive also reported a 2% year-over-year increase in Q2 revenues, amounting to $1.52 billion, with earnings per share coming in at $0.93, slightly exceeding consensus estimates. Despite mixed results across segments, the company forecasts a total growth of 3% to 4% for the year and an adjusted diluted EPS in the range of $3.80 to $3.86, indicating an 11% to 13% increase year-over-year.
Furthermore, both Truist Securities and RBC Capital adjusted their stock targets for Fortive following the Q2 results. Truist Securities revised its price target for Fortive to $82 from $89, while RBC Capital reduced its target to $77 from $83.
InvestingPro Insights
Fortive Corporation's recent strategic decision to spin off its Precision Technologies segment aligns with its impressive gross profit margins, which stand at 59.67% over the last twelve months as of Q2 2024. This strong margin underpins Baird's confidence in the company's ability to maintain a robust margin trajectory post-spin-off. Additionally, with a market capitalization of $25.12 billion and a P/E ratio of 28.39, Fortive is trading at a significant revenue valuation multiple, which suggests high expectations from the market regarding its future performance.
InvestingPro Tips further indicate that analysts predict Fortive will be profitable this year, reinforcing Baird's positive outlook. The company has indeed been profitable over the last twelve months, with a basic EPS (Continuing Operations) of $2.52. While 13 analysts have revised their earnings downwards for the upcoming period, the company operates with a moderate level of debt, which may offer some financial flexibility in its ongoing and future operations.
For investors looking for additional insights and guidance, there are more InvestingPro Tips available at https://www.investing.com/pro/FTV, which could provide further context to Fortive's financial health and market potential.
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