Fortive (FTV) Morgan Stanley‘s 12th Annual Laguna Conference 2024 summary

Strategic separation and leadership transition

• Announced a major separation, creating two investable companies with distinct growth stories, expected to complete in about a year.

• Olumide Soroye will lead New Fortive, while Tami Newcombe will head the new PT company.

• The move aims to unlock medium- and long-term value and provide strategic clarity.

• Leadership transition is designed to maximize value and leverage new expertise.

Business models and growth outlook

• SpinCo will focus on technology markets like data centers, electrification, and semiconductors, targeting mid-single-digit growth and strong margins.

• New Fortive emphasizes safety and productivity, with 50% recurring revenue and a focus on expanding this share.

• Both entities will have more focused capital allocation strategies, balancing buybacks and accretive M&A.

• Recurring revenue and domain expertise are key filters for future acquisitions.

Capital allocation and financial strategy

• Until the spin, 75% of free cash flow will go to share buybacks to demonstrate confidence in value creation.

• Post-spin, both companies will adopt balanced capital allocation, prioritizing risk-adjusted returns through buybacks and disciplined M&A.

• Modest, growing dividends and continued investment in organic growth are planned.