Why is Flir Systems (FLIR) up 3.8% since its last earnings report?

A month has passed since the last earnings report for Flir Systems (FLIR). Shares have risen about 3.8% in that time, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Flir Systems headed for a decline? Before we dive into how investors and analysts have reacted as of late, let’s take a quick look at the most recent earnings report in order to better understand the important catalysts.

FLIR Systems earnings soared in the fourth quarter, revenues increased y/y

FLIR Systems’ fourth-quarter 2020 adjusted earnings of 78 cents per share topped the Zacks Consensus Estimate of 63 cents by 23.8%. Additionally, the reported figure increased 47.2% from 53 cents in the prior-year quarter.

The company reported GAAP earnings per share of 57 cents, compared with a penny in the year-ago quarter.

For 2020, the company reported adjusted profit of $2.48, up from the year-ago profit of $2.16. Full-year earnings also surpassed the Zacks Consensus Estimate of $2.33.

Operational efficiency

FLIR Systems’ revenue increased 7.2% year-over-year to $524.3 million in the quarter. Moreover, the top line surpassed the Zacks Consensus Estimate of $491 million by 6.8%.

In 2020, the company reported revenue of $1.92 billion, up from $1.89 billion a year earlier. Full-year revenues also surpassed the Zacks Consensus Estimate of $1.89 billion.

Total backlog at the end of the fourth quarter increased 0.3% to $809.7 million year-over-year.

The company’s adjusted operating expenses decreased 9.1% year-over-year to $133.7 million.

Adjusted operating income was $122.5 million compared to operating income of $101.7 million in the fourth quarter of 2019.

Segment update

Segment quarterly revenues in Industrial Technologies segment amounted to USD 298.3 million, an increase of 7.2% compared to the previous year’s quarter. The increase is primarily due to increased demand for EST solutions as a result of the Covid-19 pandemic and increased sales of marine products.

The Industrial Technologies segment’s operating income was $85.2 million, compared to $71.8 million in the prior-year quarter. The segment’s operating margin increased to 28.6% from 25.8% in the year-ago quarter.

Revenues in Defense Technologies segment amounted to USD 226 million, an increase of 7.2% compared to the previous year’s quarter. The increase resulted primarily from increased volumes of unmanned systems

Defense Technologies segment operating income was $55.3 million, compared to $50.1 million in the prior-year quarter. The segment’s operating margin increased to 24.5% from 23.8% in the year-ago quarter.

Liquidity and cash flow

As of December 31, 2020, cash and cash equivalents were $297.8 million compared to $284.6 million as of December 31, 2019.

Long-term debt was $724.9 million, up from $648.4 million as of December 31, 2019.

Cash flow from operations for 2020 was $312.4 million compared to $370.4 million at December 31, 2019.

Acquisition update

On January 4, 2021, FLIR Systems entered into a definitive agreement to be acquired by Teledyne Technologies Incorporated, a manufacturer and supplier of advanced instrumentation, digital imaging products and software, aerospace and defense electronics and engineering systems.

The transaction is expected to close in mid-2021, subject to required regulatory approvals

How have estimates changed since then?

Over the last month, investors have witnessed an upward trend in estimate revisions.

VGM results

Currently, Flir Systems has a Weak Growth Score of D, which means the same Momentum Score. Following the exact same trajectory, the stock was rated D for value, placing it in the bottom 40% for this investment strategy.

Overall, the stock has a Total VGM Score of D. If you’re not focused on one strategy, this score should interest you.

Perspectives

Estimates for this company show an upward trend, and the scale of this revision looks promising. It’s no surprise that Flir Systems has a Zacks Rank of #2 (Buy). We expect an above-average rate of return on shares in the coming months.

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