Roper (ROP) Beats On Q3 Earnings, Buys ConstructConnect

Roper Technologies, Inc. (NYSE:ROP) reported third-quarter 2016 adjusted earnings per share of $1.65, beating the Zacks Consensus Estimate of $1.62 and increasing 2.5% year over year. Though revenues of $945.1 million were up 6.9% year over year, it fell short of the Zacks Consensus Estimate of $960.2 million as energy markets continued to be a drag.

Organic revenues were up 2% driven by software, water meter technology, medical, toll and traffic businesses. Net orders increased 4% year over year to $929 million in the quarter.

Roper also announced the acquisition of cloud company, ConstructConnect for $632 million. The acquisition, which will be completed by the end of this week, is expected to add $150 million to the top line in 2017. The company also announced that its subsidiary, TransCore has clinched New York City’s MTA project. The project involves conversion of nine bridges/tunnels of MTA into All Electronic Tolling by Nov 2017.

Segment Revenue Details

Revenues from Medical & Scientific Imaging increased 12.8% year over year to $338 million.

Revenues from RF Technology went up 19.7% from the year-ago quarter to $303.6 million.

Revenues from Industrial Technology however decreased 4.2% year over year to $178.3 million.

Also, revenues from Energy Systems & Controls declined nearly 13.4% year over year to $125.2 million.

Margins

Adjusted gross margin increased 60 basis points (bps) to 61.3%. The company reported adjusted operating margin of 28.5%, which declined 20 bps year over year.

Balance Sheet and Cash Flow

Roper Technologies ended the quarter with approximately $882.3 million in cash and equivalents compared with $778.5 million as on Dec 31, 2015. Long-term debt was $3.1 billion compared with $3.3 billion at the end of 2015.

For the first nine months of the year, the company’s adjusted cash flow was $730.8 million while adjusted free cash flow was $703.9 million.

Guidance

For the fourth quarter of 2016, Roper Technologies expects adjusted earnings per share in the range of $1.77 - $1.89.

For 2016, the company has lowered its adjusted earnings per share outlook to a range of $6.48 - $6.60 from the earlier projection of $6.57 - $6.71 per share. Global macroeconomic headwinds and weakness in the energy end markets continue to be concerns.

Our Take

Though Roper’s business continues to benefit from acquisitions and strength in its medical, application software and water businesses, the volatility in the oil and gas market continues to impact its Energy and Industrial segments. Stiff competition from the likes of Applied Industrial Technologies, Inc. (NYSE:AIT) , Barnes Group Inc. (NYSE:B) and Chart Industries Inc. (NASDAQ:GTLS) , is an added concern

Currently, Roper has a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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