Roper Industries Inc. (ROP) reported strong fourth quarter 2010 results of $1.10 per share, surpassing the Zacks Consensus Estimate of 99 cents. The strong results were primarily driven by solid revenue growth and operating margin expansion in the quarter.
Operating Performance
Roper reported earnings up 42.8% year over year and 26.4% sequentially. In fiscal 2010, earnings per share were $3.34, well above the Zacks Consensus Estimate of $3.25 and also the company guidance of $3.22 to $3.26.
Net income increased 49.2% year over year and 27.3% sequentially to $107.3 million in the quarter, with net margin of 15.8%, up 280 basis points (bps) from the prior-year quarter and 190 bps from the previous quarter.
In fiscal 2010, net income increased 34.7% year over year to $322.6 million. Net margin increased to 13.5% from 11.7% in the prior year.
Gross profit increased 27.6% year over year and 15.6% sequentially to $371.9 million. Gross margin increased to 54.7% in the quarter from 52.6% in the year-ago quarter and 53.2% in the prior quarter.
The gross profit margin for the Industrial Technology segment improved to 51.9% from 46.9% in the year-ago quarter and 51.1% in the prior quarter.
The Scientific & Industrial Imaging margin expanded to 62.8% from 58.6% in the year-ago quarter and 61.5% in the prior quarter.
The Energy Systems & Controls segment reported margin of 55.8%, which was above 55.4% in the year-ago quarter and 53.1% in the prior quarter. This was offset by the RF Technology margin that fell to 50.1% from 51.2% in the year-ago quarter. However, on a sequential basis, RF Technology increased 110 bps in the quarter.
In fiscal 2010, gross profit increased 22.2% year over year to $1.28 billion, with gross margin of 53.4%, up 250 bps from the prior year.
All the segments posted strong margin growth, with Industrial Technology segment improving 340 bps, Scientific & Industrial Imaging 480 bps, Energy Systems & Controls 60 bps and RF Technology increasing 10 bps in the fiscal 2010.
In the quarter, operating income was $166.2 million, up 37.6% from the year-ago quarter, based on improved sales. Sequentially, operating income increased 29.6%.
Although the selling and administrative costs rose 20.5% year over year, the operating margin came in at 24.5% in the quarter, an improvement of 270 bps year over year and 330 bps sequentially.
In fiscal 2010, operating income increased 30.1% y/y to $514.3 million, with operating margin increasing 230 bps.
During the quarter, EBITDA increased to $199.7 million or 29.4% of sales. In the previous quarter, EBITDA was $163.0 million or 27.0% of sales. In fiscal 2010, EBITDA increased to $638.0 million, representing 26.7% of sales.
Revenue
Fourth quarter revenues of $679.5 million were up 22.7% year over year and 12.3% sequentially. Revenues beat the Zacks Consensus Estimate of $663.0 million by 2.5%.
Acquisitions/Divestitures contributed 9.0% of the revenue growth in the quarter, while 15.0% came from organic growth. Foreign exchange had a negative impact of 1% on revenues.
All the segments performed well in the quarter. On a year-over-year basis, Industrial Technology increased 19.6%, Scientific & Industrial Imaging increased 34.2%, Energy Systems & Controls rose 23.3%, while RF Technology increased 17.0% in the quarter.
In fiscal 2010, revenue increased 16.4% year over year to $2.39 billion, surpassing the Zacks Consensus Estimate of $2.37 billion. Segment wise, Industrial Technology increased 13.3%, Scientific & Industrial Imaging increased 54.7%, Energy Systems & Controls rose 14.3%, while RF Technology increased 1.1%.
Balance Sheet & Cash Flow
Roper Industries ended the quarter with $270.4 million in cash and equivalents and $1.34 billion in total debt (including the current portion) compared with $250.8 million in cash and equivalents and $1.48 billion in total debt (including the current portion) in the previous quarter.
Operating cash flow was $155.1 million in the quarter versus $139.4 million reported in the previous quarter.
In fiscal 2010, the company reported an operating cash flow of $499.5 million as compared with $367.5 million in the prior year.
Guidance
Roper Industries expects fiscal 2011 earnings per share in the range of $3.82 to $4.02. Currently, the Zacks Consensus Estimate for the fiscal 2011 is pegged at $3.85.
For the first quarter, management anticipates earnings per share in the range of 83 cents to 87 cents. The Zacks Consensus Estimate for first quarter 2011 is currently pegged at 84 cents.
For fiscal 2011, management expects operating cash flow of $500.0 million.
Our Take
As a part of its growth strategy, Roper has made numerous acquisitions and is likely to continue doing so in the future. With the help of numerous acquisitions that are low on investment and high in margins, Roper has been growing in the SaaS business. With a record backlog of $785.0 million, the company expects strong sales growth in 2011.
Currently, Roper has a Zacks #2 Rank, which implies a short-term Buy rating on the stock.
ROPER INDS INC (ROP): Free Stock Analysis Report
Zacks Investment Research
