Can FLIR Systems (FLIR) Keep Earnings Streak Alive In Q1?

FLIR Systems, Inc. (NASDAQ:FLIR) is scheduled to report first-quarter 2018 results on Apr 25, before the opening bell. Last quarter, the company reported earnings of 58 cents per share, delivering a positive surprise of 3.6%.

We expect FLIR Systems to score an earnings beat in the to-be-reported quarter as well.

Why a Likely Positive Surprise?

Our proven model shows that FLIR Systems has the right combination of two key ingredients. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. This is perfectly the case here as you will see below:

Zacks ESP: FLIR Systems has an Earnings ESP of +2.33% as the Most Accurate estimate of 44 cents is pegged higher than the Zacks Consensus Estimate of 43 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

FLIR Systems, Inc. Price and EPS Surprise

FLIR Systems, Inc. Price and EPS Surprise | FLIR Systems, Inc. Quote

Zacks Rank: The company carries a Zacks Rank #3, which when combined with a positive ESP makes us reasonably confident of an earnings beat.

Conversely, we caution against stocks with a Zacks Ranks #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is witnessing negative estimate revisions.

Reasons Driving Better-Than-Expected Results

FLIR Systems continues to benefit from its well-diversified business portfolio in terms of geographies, products and markets. Also, the company’s restructuring efforts over the past five years have helped it to combat headwinds like currency fluctuations and difficult market conditions. Moreover, the company’s robust execution and streamlined business have enabled it to drive solid improvements in backlog, adjusted gross margin, net income and earnings per share. We believe the company’s strategic restructuring activities and solid backlog levels will continue driving profitable growth.

Also, the company’s core strength in providing reliable and effective imaging & threat-detection technologies is expected to bolster its performance in the quarter. Meanwhile, increased adoption of thermal imaging in a broad spectrum of applications, ranging from military to personal hand-held cameras and Smartphones, continue to fuel growth in this market. Moreover, FLIR Systems’ government and military business has been faring well over the past few quarters driven by its CDMQ model.

Further, the company’s persistent focus on introduction of innovative products has enabled it to penetrate new markets and expand its customer base. Notably, since the launch of Lepton technology, FLIR Systems has witnessed solid compound annual growth rate in total unit volumes. We believe that steady market traction of the newly launched products should continue supplementing sales performance in the upcoming quarters as well. In the meantime, its recent acquisitions are acting as major profit churners. The previously completed buyouts are anticipated to boost top-line growth in the quarter under review.

Despite these tailwinds, FLIR Systems’ gross margins remain vulnerable to a host of factors, including product mix changes and manufacturing cost absorption. Also, high manufacturing cost absorption is likely to restrict the company’s growth. Moreover, poor economic conditions across its key operating regions might hamper capital investment and consumer spending, thereby weighing on its profitability.

Stocks to Consider

Here are some other companies that you may want to consider, as our model shows that these too have the right combination of elements to post an earnings beat this quarter:

Raytheon Company (NYSE:RTN) has an Earnings ESP of +1.91% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Rockwell Collins, Inc. (NYSE:COL) has an Earnings ESP of +0.19% and a Zacks Rank #2.

L3 Technologies Inc. (NYSE:LLL) has an Earnings ESP of +2.51% and a Zacks Rank #3.

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