Release Date: May 01, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Fortive Corp (FTV, Financial) delivered a solid first quarter performance with adjusted earnings per share of $0.85, in line with expectations.
• The company expanded both adjusted gross and operating margins despite slightly lower-than-expected revenues.
• Fortive Corp (FTV) demonstrated strong cash flow generation and continued share repurchases, reflecting a commitment to value-enhancing capital deployment.
• The Intelligent Operating Solutions and Advanced Healthcare Solutions segments showed sustained top-line momentum.
• Fortive Corp (FTV) has reduced its exposure to imports from China by 70% since 2018, enhancing supply chain and manufacturing resilience.

Negative Points

• Core revenue declined by 2% in the quarter, slightly below expectations, with total revenue down 3% due to FX headwinds.
• Precision Technologies segment experienced an 8.4% core decline, driven by lower-than-expected orders and shipment delays.
• The company faces challenges from newly announced tariffs, with an estimated gross impact of $190 million to $220 million.
• Test and Measurement core revenue declined by high teens, with significant declines in Western Europe and China.
• Adjusted operating profit margins contracted by 260 basis points in the Precision Technologies segment due to lower volumes and unfavorable mix.

Q & A Highlights

Q: Can you clarify what you mean by localizing production in response to tariffs? Are you building new capacity in the US? A: James Lico, President and CEO, explained that Fortive has been derisking its supply chain over the years without significant new investments. The company is accelerating existing plans to reduce reliance on China, focusing on contract manufacturing and current facilities rather than building new capacity.

Q: Why is the Test and Measurement segment experiencing such a significant decline? Is this due to delayed demand or a more permanent issue? A: James Lico noted that the decline is due to customers delaying investments amid economic uncertainty, particularly in semiconductors and electronics. The company expects recovery to be pushed into 2026, with improvements anticipated throughout the year.

Q: How are tariffs impacting Fortive's financial outlook for the year, and what mitigation strategies are in place? A: Elena Rosman, VP of Investor Relations, stated that the estimated tariff impact is around $200 million for 2025, with plans to offset about 80% through pricing and other countermeasures. Full mitigation is expected by the fourth quarter of 2025.

Q: Can you provide more detail on the performance and outlook for the Advanced Healthcare Solutions (AHS) segment? A: Elena Rosman mentioned that AHS margins typically start lower in Q1 and improve throughout the year. The segment faced FX headwinds and fewer days impacting consumables, but growth investments are expected to support margin expansion as the year progresses.

Q: What are the expectations for Fortive's regional sales performance, particularly in North America, China, and Western Europe? A: James Lico highlighted that North America is expected to be the strongest market, with good performance across various segments. China is anticipated to be down high single digits for the year, while Western Europe faces challenges, particularly in the Precision Technologies segment.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.