On Thursday, Truist Securities began coverage of Fortive Corporation (NYSE:FTV), a diversified industrial technology company, assigning the stock a Buy rating and setting a price target of $99.00. The firm highlighted the significant improvement in the company's adjusted gross margins, which have increased by over 1000 basis points since Fortive was spun off from Danaher (NYSE:DHR).
The positive outlook is based on Fortive's strategic shift towards software-related businesses, which is expected to enhance profitability. Truist Securities points out that as Fortive continues to integrate more software acquisitions and benefit from the organic growth of its software segment, margins could surpass the company's own target of approximately 27% for the year 2024.
According to Truist Securities, top-performing diversified industrial companies that do not have a software component are able to achieve margins in the high 20s to 30%. The firm believes that with Fortive's increasing focus on software, the potential for margin expansion has not been fully recognized by the market.
The analyst from Truist Securities mentioned that the margin story for Fortive is underappreciated, suggesting that there is a strong case for a revaluation of the company's stock as its business model evolves. The coverage initiation and the optimistic price target reflect confidence in Fortive's strategic direction and its ability to deliver financial performance that may exceed current market expectations.
InvestingPro Insights
Fortive Corporation (NYSE:FTV) has been capturing the attention of analysts and investors alike with its robust financial metrics and strategic business moves. As Truist Securities recently initiated coverage with a bullish stance, let's dive into some key insights from InvestingPro that align with their positive outlook.
One of the standout features of Fortive's financial health is its impressive gross profit margin, which stands at a strong 59.26% for the last twelve months as of Q4 2023. This high margin is indicative of the company's efficiency and its potential to translate sales into profits effectively—a point that Truist Securities also emphasized when discussing the company's improved adjusted gross margins since its spin-off from Danaher.
InvestingPro data underscores the company's financial stability with a market capitalization of $30.03 billion and a Price to Earnings (P/E) ratio of 34.69, which, while on the higher side, reflects investor confidence in Fortive's future earnings potential. This is further supported by the strong return over the last three months, which has been calculated at 17.07%, showcasing the stock's recent performance momentum.
Moreover, the InvestingPro Tips reveal that analysts predict Fortive will be profitable this year, with the company already showing profitability over the last twelve months. This aligns with the sentiments expressed by Truist Securities regarding the potential for the company's margin expansion and profitability as it increases its focus on software-related businesses.
For readers looking to delve deeper into Fortive's prospects, there are additional InvestingPro Tips available, pointing to various other aspects of the company's financial health and market performance. To explore these insights and make more informed investment decisions, consider using the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription at InvestingPro.
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