FLIR Systems Downgraded to Strong Sell - Analyst Blog

Zacks Investment Research downgraded FLIR Systems, Inc. FLIR to a Zacks Rank #5 (Strong Sell) on Mar 13, 2014.

Why the Downgrade?

FLIR Systems has witnessed sharp downward estimate revisions after reporting disappointing fourth-quarter 2013 results. Further, this thermal image provider reported negative earnings surprises in the last 3 of the 4 quarters, with average earnings miss of 3.9%. This apart, out of the 6 analysts covering the stock, 5 have lowered their estimates for the current quarter and 5 out of 7 analysts have downgraded their estimates for the next quarter in the last 60 days, while all 6 analysts have downgraded their estimates for fiscal 2014.

On Feb 7, FLIR Systems reported fourth-quarter 2013 earnings (excluding one-time items) of 35 cents, down 32.7% from 52 cents in the year-ago-quarter. Quarterly earnings also missed the Zacks Consensus Estimate by 10.3% or 4 cents.

The quarterly results were primarily impacted by the weakness in order flow from the U.S. government-funded customers.

Though the company's revenues picked up 3.6% during the quarter driven by its Commercial Systems segment, it was offset by a decline in the Government Systems division. The Government Systems division was primarily impacted by weak domestic demand from the Department of Defense.

Nevertheless, the company announced changes in its management structure and also restructured its reporting segments to enhance company-wide communication, while creating a logical structure that will further leverage its vertical integration and focus on core markets.

The Zacks Consensus Estimate for the first quarter of 2014 decreased as much as 25.7% to 26 cents per share and the estimate for the second quarter declined 15.0% in the last 60 days. For 2014, the Zacks Consensus Estimate sank 10.3% to $1.48 per share.

Not all defense equipment providers are performing as poorly as FLIR Systems. Some better-ranked companies in the industry that are worth a look include Alliant Techsystems Inc. ATK, BAE Systems plc (BAESY) and Astronics Corporation ATRO, all of which sport a Zacks Rank # 1 (Strong Buy).