Can FLIR Systems (FLIR) Deliver A Beat This Earnings Season?

FLIR Systems Inc. (NASDAQ:FLIR) is slated to report second-quarter 2017 results, before the opening bell on Jul 26.

In the last reported quarter, the company’s earnings were in line with the Zacks Consensus Estimate, putting an end to the streak of earnings misses in the last seven quarters. FLIR Systems has an average negative surprise of 2.6% over the trailing four quarters.

We expect FLIR Systems to score an earnings beat in the about-to-be-reported quarter, marking an end to its unimpressive earnings surprise history.

Why a Likely Positive Surprise?

Our proven model shows an earnings beat for FLIR Systems as it possesses the key components.

Zacks ESP: Earnings ESP for FLIR Systems is +2.44% as the Most Accurate estimate is pegged at 42 cents, higher than the Zacks Consensus Estimate of 41 cents. A favorable Zacks ESP serves as a meaningful and leading indicator of a likely positive earnings surprise. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: FLIR Systems has a Zacks Rank #3 (Hold). Note that stocks with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 have a significantly higher chance of beating earnings estimates.

Conversely, we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

The favorable combination of FLIR Systems Zacks Rank #3 and +2.44% ESP makes us reasonably confident of a positive earnings beat.

Growth Factors in this Past Quarter

FLIR Systems’ diverse portfolio has been a staple growth driver, helping it offset weaknesses associated with any one market. The company’s restructuring efforts over the past five years have allowed it to streamline business operations and optimize growth. Key metrics like revenues, operating income, operating margin and adjusted EPS have materially benefitted from such actions. We expect this trend to continue in the soon-to-be-reported quarter as well.

In addition, impressive traction of FLIR Systems’ products, featuring the Lepton® thermal microcamera core, is expected to boost the top line significantly. Since the launch of Lepton technology, the company has seen a 58% compound annual growth rate in total unit volumes. Products launched during the first quarter – including X6900sc SLS, X8500sc SLS cameras and upgraded version of FLIR M-series thermal cameras – are expected to ramp up sales for the quarter under review.

Moreover, FLIR Systems’ keen eye for strategic acquisitions is expected to be conducive to its inorganic growth. Previously completed acquisitions, including Armasight, DVTEL and Dynamics, are expected to boost top-line performance. In addition, the company’s diligent CDMQ model is likely to compound the sales of its government and military business. Using this model, FLIR Systems has been able to combat softness in cyclical spending associated with government markets.

Other Stocks That Warrant a Look

Here are some other companies that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter:

KLX Inc. (NASDAQ:KLXI) has an Earnings ESP of +4.48% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Huntington Ingalls Industries, Inc. (NYSE:HII) has an Earnings ESP of +4.96% and a Zacks Rank #2.

TransDigm Group Incorporated (NYSE:TDG) has an Earnings ESP of +1.01% and carries a Zacks Rank #2.

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