Roper Technologies (ROP, Financial) recently reported strong fourth-quarter results. The fourth quarter looked impressive with revenues increasing 7% and orders increasing 17% to a record $1.1 billion.
During the quarter, the company acquired two software companies ConstructConnect and Deltek which cost the company $3.4 billion. This decision was made since both the companies boast of recurring revenue and substantial cash.
Fourth-quarter performance
GAAP diluted earnings per share during the fourth quarter were $1.78.
Adjusted diluted earnings per share were $1.86.
GAAP revenue increased by 7% and was $1.011 billion.
GAAP adjusted revenue increased by 7% and was $1.018 billion.
Orders increased by 17% and were $1.085 billion.
GAAP gross margin increased by 60 basis points and was 62.0%.
GAAP adjusted gross margin increased by 50 basis points and was 62.3%.
Operating cash flow during the quarter was $270 million.
EBITDA during the quarter was a record $365 million.
The company ended the quarter with $757.2 million in cash and equivalents (which was $778.5 million in the prior-year quarter).
Segmentwise revenue
- RF Technology: Revenue from this segment increased by 19.8% from the prior-year quarter and was $337.7 million in the fourth quarter.
- Energy Systems & Controls: Revenue in the segment decreased by 9.7% year over year and was $142.6 million.
- Medical & Scientific Imaging: Revenue from this segment increased by 9.4% and was $352 million.
Full-year results
GAAP diluted earnings per share for the full year was $6.43 (a 6% decrease from the prior-year period).
Adjusted diluted earnings per share were $6.57 (a 2% decrease from the prior-year period).
GAAP revenue increased by 6% and was $3.79 billion.
Adjusted revenue increased by 6% and was $3.81 billion.
Full-year EBITDA was $1.31 billion or 34.6% of adjusted revenue.
Operating cash flow increased by 4% and was $964 million.
Adjusted operating cash flow increased by 8% and was $1.001 billion, representing 26% of revenue.
Dividend
The company declared a dividend of 35 cents per share payable on April 21 to stockholders of record on April 7.
Expectations for 2017
| Â | Range |
| Diluted earnings per share | To be between $8.82 and $9.22 |
| Full-year adjusted revenue | To increase between 20% and 22% (with the inclusion of organic revenue growth between 3% and 5%) |
Focus
- Efficiency in operations.
- Internal growth initiatives.
- Disciplined acquisitions.
Strong company attributes
- Higher gross margins.
- Excess free cash flows.
- Increasing revenues.
- Broad customer base.
Conclusion
With annual revenues of $3.6 billion, Roper is a diversified company that provides products and solutions to diverse end markets. It caters to the software information networks, medical, water, energy and transportation sectors.
The company boasts of leadership in favorable markets. The company is in a good form now and expects that the acquisitions will add to 50% of the EBITDA in 2017. Despite the headwinds from the foreign exchange fluctuations, the company is growing its revenue. The fourth quarter looked impressive with meaningful financial metrics.
It boasts of good cash in hand and so it can continue to grow through strategic acquisitions. It is generating shareholder returns through dividends and cash flows. Cash is a major component to its success. Roper is consistently converting cash and is fueling acceleration of cash through capital deployment. It has lots of opportunities to grow through its disciplined and rigorous acquisitions policy.
The company is all set to deliver compelling cash flow and maintain leadership positions in niche markets. It has declared a cash dividend in each quarter since February 1992 and has been maintaining an increased dividend rate annually since then. The management affirmed that the company will move forward by boosting the software and network businesses through acquisitions. It has a positive earnings estimate, which signals that the company is heading for a positive time ahead. The stock is moving higher and adding this company may reap shareholder returns.
Disclosure: I do not hold any position in the company.
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