Fortive (FTV) Q2 2024 earnings summary

Executive summary

• Q2 2024 delivered strong adjusted EPS and free cash flow at the high end of guidance, with 90 bps adjusted operating margin expansion and 9% adjusted earnings growth, despite revenue at the low end of guidance.

• Year-to-date, achieved 100 bps adjusted operating margin expansion and double-digit earnings and free cash flow growth on 3% revenue growth.

• Recurring revenue now 42% of portfolio, growing low double-digit year-to-date, with high single-digit software ARR growth and healthcare upside.

• Completed $1.72 billion acquisition of EA Elektro-Automatik, adding $1.17 billion in goodwill to PT; divested Invetech, resulting in a $25.6 million loss.

• Repurchased 2 million shares in Q2, with similar pace expected for the rest of the year.

Financial highlights

• Q2 2024 revenue was $1.55 billion, up 2% year-over-year, with flat core growth; acquisitions contributed 3 points, FX was a headwind.

• Adjusted EPS for Q2 was $0.93, up 9% year-over-year; GAAP EPS was $0.55.

• Free cash flow for Q2 was $280 million, down 7% year-over-year; YTD FCF was $510 million, up 13%.

• Operating profit margin was 19.4% (GAAP), with adjusted margin up 90 bps to 27%.

• Industry-leading free cash flow margins and strong cash conversion.

Outlook and guidance

• Q3 2024 revenue guidance: $1.535–$1.560 billion; adjusted EPS $0.92–$0.95.

• Full-year 2024 revenue expected at $6.25–$6.30 billion, with core growth of 2%–3% and adjusted EPS guidance of $3.80–$3.86, up 11%–13%.

• Free cash flow for FY 2024 expected to be ~$1.37 billion, up 10% year-over-year.

• Expect to generate over $8 billion in free cash flow over the next five years.

• Outlook reflects double-digit earnings and cash flow growth, with balanced end-market view.