A month has gone by since the last earnings report for Roper Technologies (ROP). Shares have lost about 0.2% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Roper Technologies due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Roper’s fourth-quarter 2023 adjusted earnings of $4.37 per share beat the Zacks Consensus Estimate of $4.33. On a year-over-year basis, earnings increased 11%.
Roper’s net revenues of $1,613.5 million beat the consensus estimate of $1,575 million. The top line increased 12.8% year over year. Organic sales in the quarter increased 8% year over year, owing to strength across the three segments. Acquisitions boosted sales by 4%.
Segmental Performance
Roper divested its Process Technologies segment and industrial units of the Measurement & Analytical Solutions segment. Beginning the second quarter of 2022, the company started reporting under three segments — Application Software, Network Software and Technology Enabled Products.
Application Software’s revenues totaled $851.8 million, representing 52.8% of the quarter’s top line. Our top-line estimate for the quarter was $815.6 million. On a year-over-year basis, the segment’s revenues increased 15%. Organic sales in the quarter increased 7%.
Network Software & Systems generated revenues of $362.7 million, accounting for 22.5% of fourth-quarter revenues. Our top-line estimate for the quarter was $366.1 million. Segmental revenues grew 3% year over year. Organic sales in the quarter increased 3%.
The Technology Enabled Products segment generated revenues of $399.0 million, accounting for 24.7% of the quarter’s revenues. Our top-line estimate for the quarter was $381.5 million. Sales were up 17% year over year. Organic sales in the quarter grew 17%.
Margin Profile
In the reported quarter, Roper’s cost of sales increased 13.9% year over year to $488.3 million. Gross profit in the quarter grew 12.3% to $1,125.2 million while the gross margin decreased to 69.7% from 70% in the year-ago quarter.
Selling, general and administrative expenses increased 12.3% to $662.4 million. Adjusted EBITDA was $659 million, indicating year-over-year growth of 11.3%. The margin decreased 60 basis points to 40.8%. Interest expenses decreased 6.9% year over year to $50.1 million.
Balance Sheet & Cash Flow
Exiting 2023, Roper had cash and cash equivalents of $214.3 million compared with $792.8 million at the end of December 2022. Long-term debt (net of current portion) was $5,830.6 million compared with $5,962.5 million at the end of the fourth quarter of 2022.
Roper generated net cash of $2,035.1 million from operating activities in 2023, indicating an increase of 177% from the year-ago level. Capital expenditure totaled $68 million compared with $40.1 million in the year-ago quarter.
In 2023, ROP rewarded its shareholders with a dividend payment of $290.2 million, up 10.6% year over year.
Outlook
ROP predicts adjusted earnings per share (EPS) from continuing operations to be in the $17.85-$18.15 range. The mid-point of the guided range — $18 per share — lies above the Zacks Consensus Estimate of earnings of $17.96 per share. Total revenues are expected to increase 11-12% and organic revenues are anticipated to increase 5-6% in 2024 from the year-ago reported numbers.
For the first quarter, Roper anticipates adjusted EPS to be in the band of $4.30-$4.34. The consensus estimate for the same is pegged at $4.28.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates revision.
VGM Scores
Currently, Roper Technologies has a poor Growth Score of F, however its Momentum Score is doing a lot better with an A. 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 D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Roper Technologies has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Roper Technologies is part of the Zacks Computers - IT Services industry. Over the past month, ServiceNow (NOW), a stock from the same industry, has gained 0%. The company reported its results for the quarter ended December 2023 more than a month ago.
ServiceNow reported revenues of $2.44 billion in the last reported quarter, representing a year-over-year change of +25.6%. EPS of $3.11 for the same period compares with $2.28 a year ago.
ServiceNow is expected to post earnings of $3.13 per share for the current quarter, representing a year-over-year change of +32.1%. Over the last 30 days, the Zacks Consensus Estimate remained unchanged.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for ServiceNow. Also, the stock has a VGM Score of B.
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