Flir Systems (FLIR) Down 26.8% Since Last Earnings Report: Can It Rebound?

It has been about a month since the last earnings report for Flir Systems (FLIR). Shares have lost about 26.8% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Flir Systems due for a breakout? 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 get a better handle on the important catalysts.

FLIR Systems (NASDAQ:FLIR) Q4 Earnings Miss Estimates, Sales Up Y/Y

FLIR Systems fourth-quarter 2019 adjusted earnings of 55 cents per share missed the Zacks Consensus Estimate of 62 cents by 11.3%. The reported figure also declined 11.3% from the 62 cents registered in the prior-year quarter.

Excluding the one-time items, the company reported GAAP earnings of a penny compared with the earnings of 71 cents recorded in the year-ago quarter.

The company’s 2019 adjusted earnings of $2.23 per share missed the Zacks Consensus Estimate of $2.30 by 3%. However, the reported figure edged down 0.5% from the prior-year tally of $2.22.

Total Revenues

FLIR Systems’ revenues increased 9% year over year to $489 million in the reported quarter. Improved sales performance of the Industrial and Government and Defense business segments primarily resulted in this year-over-year top-line growth. The top line, however, missed the Zacks Consensus Estimate of $500.2 million by 2.2%.

Meanwhile, Organic revenues decreased 1.5%, which excludes revenues from acquisitions within the last 12 months.

FLIR Systems’ 2019 revenues climbed 6.3% to $1,887 million from the prior-year tally of $1,775.7 million. The top-line figure, however, missed the Zacks Consensus Estimate of $1,900 million by 0.7%. Organic revenue growth was 1.1%, which excludes revenues from acquisitions within the last 12 months and security business divestitures.

Segment Details

In the Industrial segment, revenues totaled $192.8 million, up 6.1% on a year-over-year basis. The upside can be attributed to increased sales on continued strength in cooled cameras and components as well as machine vision. Operating income was $63.5 million, 10.9% higher than the fourth-quarter 2018 tally.

In the Government and Defense segment, revenues summed $210.7 million, up 23.1% on a year-over-year basis. This upswing resulted from increased contributions from the successful acquisitions of Aeryon Labs and Endeavor Robotics. Operating income for the December-end quarter decreased 0.4% year on year to of $53.9 million.

The Commercial segment’s revenues slid 10.6% to $85.5 million from the year-ago period. The segment’s revenues were adversely impacted by lower sales volume in the Outdoor and Tactical Systems and Security product businesses. Operating income was $12.2 million, which fell 19.4% compared with the year-ago quarter’s income.

Adjusted operating income came in at $103.9 million compared with the prior-year quarter’s $107.9 million, reflecting a 3.8% decline. Also, the company’s total operating expenses flared up 25.9% year over year to $178.6 million.

Liquidity & Cash Flow

As of Dec 31, 2019, the company's cash and cash equivalents were $284.6 million compared with $512.1 million as of Dec 31, 2018.

Long-term debt summed $648.4 million on Dec 31, 2019, significantly up from $421.9 million on Dec 31, 2018.

Cash flow generated from operating activities at the end of 2019 amounted to $370.4 million compared with the prior-year tally of $374.1 million.

Outlook

FLIR Systems has issued its guidance for 2020. The company projects adjusted earnings per share at $2.10-$2.30 on revenues of $1.85-$1.925 billion.

Currently, the Zacks Consensus Estimate for 2020 earnings is pegged at $2.56 on revenues of $2 billion. Both earnings and revenue estimates come in above the projected range of the company’s guidance.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month. The consensus estimate has shifted -29.71% due to these changes.

VGM Scores

Currently, Flir Systems has a nice Growth Score of B, a grade with the same score on the momentum front. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. It's no surprise Flir Systems has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.