Roper (ROP) Displays Bright Prospects, Headwinds Persist

On Mar 17, we issued an updated research report on Roper Technologies, Inc. (NYSE:ROP) .

In the past three months, this Zacks Rank #3 (Hold) stock has lost 18.7%, narrower than the industry’s decline of 20.9%.

Existing Scenario

Roper has been witnessing strength across both its network software and medical products businesses. Also, its Application Software segment has been benefiting from strength across its Aderant, Data Innovations and Strata business units. For 2020, the company anticipates organic revenues of both the Application Software, and Measurement & Analytical Solutions segments to grow in mid single digits, while that of the Network Software & Systems segment is expected to increase in mid-teens.

Also, the company is focused on strengthening its competency through addition of assets. For instance, its iPipeline Holdings buyout (completed in August 2019) will likely help it to generate revenues of $200 million and free cash flow (after-tax) of $70 million in 2020. Also, in the same month, it completed the acquisition of ComputerEase Software, which has been strengthening its Deltek business unit. Notably, in 2019, the company used $2.4 billion for making acquisitions, surging 87% from the previous year.

Moreover, Roper remains highly committed toward increasing shareholder wealth through dividend payouts. In 2019, it distributed $191.7 million as dividends. It is worth mentioning here that it hiked quarterly dividend rate by 11% or 5 cents per share to 51.25 cents in November 2019.

However, softness in the Process Technologies segment remains a major concern for the company. For 2020, it predicts organic sales of the segment to decline in mid single digits due to continued weakness in upstream oil & gas businesses.

In addition, rise in debt level remains a concern for Roper. In the last three years (2017-2019), the company's long-term debt jumped 2.4% (CAGR), with long-term debt of $4,673.1 million at the end of 2019. Also, net interest expenses in the year were $186.6 million, up 2.5% year over year.

Key Picks

Some better-ranked stocks from the same space are Graco Inc. (NYSE:GGG) , Tennant Company (NYSE:TNC) and Dover Corporation (NYSE:DOV) . While Graco and Tennant sport a Zacks Rank #1 (Strong Buy), Dover carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Graco delivered positive earnings surprise of 0.40%, on average, in the trailing four quarters.

Tennant delivered positive earnings surprise of 26.60%, on average, in the trailing four quarters.

Dover delivered positive earnings surprise of 5.36%, on average, in the trailing four quarters.

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