Earnings Preview: Roper Industries Growth Seen Continuing in Wake of Northern Digital Acquisition - Agilent Technologies (NYSE:A), Halliburton (NYSE:HAL)

Roper Industries

ROP

is scheduled to report its second-quarter 2011 results Monday, July 25, before the opening bell. Investors will be looking for updates on the recently completed acquisition of Northern Digital, and how the acquisition might influence the company's sales and earnings growth momentum and its full-year guidance. Analysts are looking for the electronics conglomerate to report per-share earnings of $0.99, which is a 25.3% rise from the same period of last year. That EPS estimate is unchanged from 60 days ago. The consensus forecast also calls for Roper to post revenues of $680.1 million, an increase of 19.9% from a year ago. Note that analysts underestimated Roper's earnings in the past three quarters by between four and ten cents per share. Also, analysts so far are looking for sequential and year-over-year growth of both earnings and revenue in the current quarter.

The Company

Sarasota, Florida-based Roper Industries operates in four segments. The Medical and Scientific Imaging segment's products include ultrasound measurement instruments and digital imaging products and software. The Energy Systems and Controls segment produces control systems, testing equipment and industrial valves and controls. The Industrial Technology segment's products include industrial pumps, leak testing equipment, flow measurement and metering equipment and automatic meter reading products and systems. The RF Technology segment provides radio frequency identification communication technology and software solutions. During the three months that ended in June, the company announced record first-quarter results and raised its full-year guidance. As noted above, Roper also acquired Northern Digital, a medical technology company based in Ontario, during the quarter and said its acquisitions pipeline was “full.”

Performance

The company has a long-term earnings per share growth forecast of 15.1%. Its P/E ratio is less than the industry average, and the forward P/E ratio estimate is lower than the trailing P/E. Roper has a dividend yield of 0.5%.The consensus recommendation is to buy the stock; five of eleven analysts rate it a Strong Buy. Their mean price target (or where analysts expect the share price to go) is $95.18 per share. The share price ended last week at $84.46, which is 14.3% higher than six months ago. That price also is above the 50-day and 200-day moving averages. The stock has outperformed the scientific and medical instruments industry average, as well as the broader markets, in the past six months.

Action Items:Bullish:

Traders interested in exchange traded funds invested in Roper Industries might want to consider the following trades:

SPDR S&P 500 Trust SPY: up 21.9% in the past year
PowerShares Water Resources Portfolio PHO: up 22.6% in the past year
Vanguard Dividend Appreciation Index Fund VIG: up 20.7% in the past year
Industrial Select Sector SPDR Fund XLI: up 22.5% in the past year

Bearish:

Traders more interested in Roper's competitors might want to consider these alternative positions:

Agilent Technologies A: up 60.0% in the past year
Haliburton HAL: up 86.9% in the past year
IDEX IEX: up 37.8% in the past year

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