FTV - Fortive Has Lost Some Luster With Cyclical End-Market Pressures
2024-07-04 13:23:58 ET
Summary
- Fortive's stock has lagged the industrial sector, possibly due to lack of differentiation on growth and margins and lower investor interest in M&A-driven stories.
- Where once management talked up the virtues of its SaaS businesses and strong recurrent revenue streams, now the focus seems to have shifted toward Fortive's leverage to AI and electrification.
- Test & measurement businesses like Fluke and Tektronix do have legitimate leverage to long-term automation and electrification trends, as does Fortive's sensing and instrumentation businesses.
- Mid-single-digit revenue and free cash flow growth can support a fair value modestly above today's price and Fortive could have catch-up/rebound potential, but other names are more interesting.
Once a darling, some of the shine has come off of Fortive ( FTV ) and the shares have continued to lag the industrial sector since my last update . I believe some of the trouble is that Fortive doesn’t really stand out thematically, and investors have moved on from (or at least are paying lower multiples for) stories that used to be fueled by M&A-driven growth in SaaS and recurring revenue. Moreover, with the recent secular downturn, Fortive’s growth doesn’t look all that differentiated, which I believe was also a big part of bull theses....
Fortive Has Lost Some Luster With Cyclical End-Market Pressures