JPMorgan Impressed With Fortive — 'In A Financially Neutral Way'

Industrial name Fortive Corp FTV has been a consistent outperformer since its spin-off from Danaher Corporation DHR, according to JPMorgan. 

The Analyst

JPMorgan analyst Stephen Tusa downgraded Fortive from Overweight to Neutral and maintained an $84 price target. 

The Thesis

The outperformance of Fortive shares is due to solid fundamental execution, with the ability to navigate pressure points in certain businesses and steady capital deployment, Tusa said in a Friday note.

"We expect all aspects of FTV's franchise quality to remain intact and remain impressed with the ongoing portfolio transformation, including the recent A&S/Altra deal, in a financially neutral way," the analyst said. 

Positive earnings revisions are likely in light of Fortive's impending $8-billion capital deployment, Tusa said. This is adequately reflected in Fortive's multiple, with the premium likely to correct to a more normalized range as deal accretion kicks in, he said. 

While JPMorgan sees Fortive's recent M&A and divestiture moves as fitting well with the company's strategy, appropriate deal multiples could be "challenging," Tusa said. 

"Net-net, FTV remains a top class franchise, though at current levels, risk-reward is now in-line with the group average and we would be closely watching for a more attractive entry point." 

The Price Action

Fortive shares are up about 36 percent over the past year.

The stock was up more than 2 percent at $79.96 at the time of publication Friday. 

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Fluke Connect screenshot courtesy of Fortive Corp.