Barclays Says Fortive Earnings 'Close To Trough Than Peak'

Barclays’ Scott R. Davis believes Fortive Corp FTV shares could potentially see a 12 percent upside to their closing price on July 5.

Davis initiated coverage of the company with an Overweight rating and price target of $55.

Earnings ‘Closer To Trough’

“Our higher-than-peer target multiple reflects our view that Fortive's culture/management quality/capital allocation processes are best-in-class, as well as our view that Fortive's earnings are closer to trough than peak,” the analyst mentioned.

Following the completion of Fortive’s spin-off from Danaher Corporation DHR, Davis pointed out the industrial spins tend to unlock value and both Danaher and Fortive were likely to accelerate value creation for shareholders going forward.

Related Link: Fortive Gets Positive Opinion From Morgan Stanley Into IPO

Growth Drivers

The analyst expects M&A to be the key growth driver for Fortive, and that the company would exit 2016 with “flattish to positive” core growth.

However, Davis expressed some concern regarding the uncertainty regarding the growth prospects in 2H16 and 2017 following Brexit, although the analyst did not expect any significant risk for the company as compared to the rest of the coverage universe.

“Interestingly, a less certain macro - on the heels of Brexit — may mean deals are more available/less expensive,” Davis noted.

The analyst estimated 2 percent and 6 percent growth for 2H16 and 2017, respectively.

Danaher closed Tuesday's regular trading session down 21.44 percent on the day at $80.40. In Wednesday's pre-market session, the stock was up 0.25 percent at $80.60.