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Will FLIR Systems Manage to Pull an Earnings Surprise? - Analyst Blog

Zacks Equity Research
Updated

FLIR Systems Inc. FLIR is slated to report second-quarter 2015 results on Jul 24.

Last quarter, the company posted a positive surprise of 3.0%. Also, for the trailing four quarters, the stock has an average positive surprise of 3.7%.

Let's see how things are shaping up for this announcement.

Factors to Consider

FLIR Systems’ well-diversified business portfolio in terms of geographies, products and markets remains one of its major strengths.

Over the last three months, the company has introduced a range of products to broaden its customer base as well as improve its market position. These include FLIR MR160 Imaging Moisture Meter, FLIR ONE thermal imager for both iOS and Android device platforms, Wi-Fi-enabled HD FLIR FX camera and K2 and K65 thermal imaging cameras.

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Impressive market traction of these products will likely boost the company’s profitability growth in the to-be reported quarter.

Apart from this, FLIR Systems’ restructuring initiatives are expected to drive its financial results for the second quarter. During the first quarter, the company undertook several cost-saving initiatives that did much to support its profitability growth despite weak top-line performance. 

However, with strengthening of the U.S. dollar, FLIR Systems anticipates adverse impact from currency volatility across the globe. In the previous quarter, currency volatility had caused an approximately $17-million reduction in its revenues, with the Surveillance segment being the worst hit. Moreover, poor performance of the surveillance sector for the past few quarters worsened the impact.

As FLIR Systems sources a significant portion of its revenues from outside the U.S., it is likely to witness reduction in capital investment and consumer spending in key markets in the second quarter on account of currency volatility. At the same time, volatility in the company’s primary market and seasonal fluctuation of demand may hamper the company’s financial performance in the quarter under review.

Earnings Whispers

Our proven model does not conclusively show that FLIR Systems will beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below.

Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at 38 cents.

Zacks Rank: FLIR System currently has a Zacks Rank #4 (Sell).

We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Stocks to Consider

Here are some companies which you may consider, as our model shows that they have the right combination of elements to post an earnings beat this quarter:

Fair Isaac Corp. FICO carries an Earnings ESP of +12.50% and a Zacks Rank #1.

Amazon.com Inc. AMZN has an Earnings ESP of +33.33% and a Zacks Rank #2.

L-3 Communications Holdings Inc. LLL has an Earnings ESP of +1.74% and a Zacks Rank #2.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
FLIR SYSTEMS (FLIR): Free Stock Analysis Report
 
AMAZON.COM INC (AMZN): Free Stock Analysis Report
 
L-3 COMM HLDGS (LLL): Free Stock Analysis Report
 
FAIR ISAAC INC (FICO): Free Stock Analysis Report
 
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