These are interesting days for Fortive (NYSE:FTV). While the company is certainly getting a pop from short-cycle businesses, the healthcare operations have been disappointing the Street with respect to growth and margins, and the bull-bear debate rages on as to just how cyclical Fortive is after the Vontier (NYSE:VNT) split. A recent return to M&A does ease some of the capital deployment questions, though the price paid was not low.
It’s been a while since I’ve written on Fortive, but I haven’t missed a lot in terms of share price performance. The stock has popped since the second quarter earnings report, but since my last article the shares are up less than 5% - lagging the 20% or so move in the broader industrial space, as well as fellow “M&A compounders” like Ametek (NYSE:AME), Danaher (NYSE:DHR), IDEX (NYSE:IEX), and Roper (NYSE:ROP), with Danaher up about 35% and the rest up by a mid-to-high-teens percentage.
At this point, I find Fortive’s valuation okay but not exciting. I do think the company can generate organic growth at a mid-single-digit clip with improving margins, and I’m relatively bullish on the company’s ability to drive organic growth from its software operations. I also like the leverage to factory digitalization and industrial sensing, and I think the medical business will be a nice acyclical offset. But again, I think that’s mostly in the share price.
Read more here:
Fortive Setting Out To Show It Has Crafted A Durable And Superior Compounder Business Model
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