Fortive Pivoting Toward A Higher-Growth, Higher-Margin Model

Fortive (FTV) management has always espoused their belief in continuous transformation, and they're certainly living up to that philosophy. Roughly three years from the time of its split from Danaher (DHR), and about a year after the combination of its automation assets with Altra Industrial Motion (AIMC), Fortive is yet again launching a major restructuring that will see Fortive separate its retail fueling, telematics, and tool businesses into a new company, leaving the surviving Fortive more focused on higher-growth market segments with higher recurring revenue potential and potentially more robust margins.

That Fortive would make this move isn't surprising, particularly when you look at how companies like Danaher, Dover (DOV), Emerson (EMR), Honeywell (HON), and Roper (ROP) have been positioning/repositioning themselves in recent years. While bears could argue that Fortive may be doing this deal to blur some of the consequences of recent high-multiple acquisitions, I believe management has earned more credibility and benefit of the doubt than that. I wouldn't call Fortive's current valuation a "can't miss" opportunity, particularly with growing worries about the macro cycle, but the pullback does make this a name to consider.

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Fortive Pivoting Toward A Higher-Growth, Higher-Margin Model