Q3 2024 Earnings Summary
Metric | Period | Previous Guidance | Current Guidance | Change |
---|---|---|---|---|
Revenue Growth | Q4 2024 | no prior guidance | 3% | no prior guidance |
Core Revenue Growth | Q4 2024 | no prior guidance | 1% | no prior guidance |
Adjusted Operating Profit | Q4 2024 | no prior guidance | +6%, ~75 bps margin expansion | no prior guidance |
Adjusted Diluted EPS | Q4 2024 | no prior guidance | $1.11 to $1.14 | no prior guidance |
Free Cash Flow | Q4 2024 | no prior guidance | $425M | no prior guidance |
Revenue Growth | FY 2024 | 3% to 4% | 3% | lowered |
Core Revenue Growth | FY 2024 | 2% to 3% | 1% | lowered |
Adjusted Operating Profit Margin | FY 2024 | 27% to 27.5% | ~100 bps year-over-year increase | lowered |
Adjusted Diluted EPS | FY 2024 | $3.80 to $3.86 | $3.84 to $3.87 | raised |
Free Cash Flow | FY 2024 | no prior guidance | $1.4B | no prior guidance |
Metric | Period | Guidance | Actual | Performance |
---|---|---|---|---|
Revenue Growth | Q3 2024 | 3% to 4.5% year-over-year | 2.68% year-over-year, calculated from Q3 2023 revenue of $1,494.5MVs. Q3 2024 $1,534.6M | Missed |
Topic | Previous Mentions | Current Period | Trend |
---|---|---|---|
Recurring references to organic growth and mid-single-digit outlook | Consistently cited in Q2, Q1, and Q4 2023 as a core focus. | Emphasized mid-single-digit growth in all segments and ~75 bps of margin expansion in 2025. | Consistent; remains central to the company’s outlook. |
Margin expansion targets across multiple segments | Prior quarters highlighted 100+ bps expansions in most segments. | Q3 2024 guidance includes ~75 bps expansion, with AHS, IOS, and PT all contributing. | Consistent focus on cost management and profitability. |
Precision Technologies (Tektronix) performance and uncertainty in recovery timelines | Previously cited delayed mil/gov demand and slower China recovery. | Core down ~4%, but new orders up high single digits; gradual rebound expected in 2025. | Ongoing caution; incremental optimism as orders improve. |
Advanced Healthcare Solutions segment growth and margin expansion | Historically mid-to-high single-digit growth with steady margin gains. | 9% core growth, 300 bps margin expansion in Q3 2024. | Consistently strong performance; significant profitability driver. |
Intelligent Operating Solutions segment momentum | Has shown mid-single-digit growth and margin gains in previous calls. | ~2% core growth; 50 bps margin expansion; strong SaaS ARR in Q3. | Ongoing resilience with recurring revenue emphasis. |
EA (Electric and Autonomous) business challenges and delayed recovery | Prior calls noted revenue pushouts and delays in EV/battery projects. | No near-term rebound cited; EV/mobility end markets remain weak. | Persistent headwinds; high long-term potential once EV recovers. |
Pricing strategies exceeding peers and supporting gross margins | Mentioned in Q4 2023 as a key margin driver; not consistently addressed otherwise. | Referenced strong premium pricing power from innovation. | Sporadic but important for margin support. |
Reduced revenue forecasts impacting long-term EPS targets | Cited in Q2 2024 as feasible yet challenging. | $4.50 EPS goal deemed aspirational; ~$200M revenue gap noted. | Continued caution on hits to EPS trajectory. |
Slower recovery in China and Asia restraining overall growth | Slower China rebound repeatedly highlighted, impacting Tektronix. | China down high single digits; Asia ex-China up nearly double digits. | Ongoing regional drag; improvement timeline uncertain. |
Project delays in military, government, and industrial markets | Q2/Q1 noted pushouts in mil/gov and weak industrial demand. | Some defense orders recovered in Q3; industrial deliveries still delayed. | Gradual recovery; remains a watch area. |
Acquisitions (EA, ServiceChannel, ProVation) and evolving returns on invested capital | Previous calls stressed synergy realization and recurring revenue lift. | EA diversifying beyond EV, ProVation driving 20% SaaS growth. | Integral deals with ongoing synergy and ROIC focus. |
Strong free cash flow enabling share repurchases and dividend growth | Q2 and Q4 2023 highlighted ≥$8B FCF over 5 yrs for buybacks/dividends. | Repurchased ~6M shares YTD; no explicit dividend update in Q3. | Ongoing capital return, supporting EPS. |
Fluke brand’s resilience amid electrification and AI opportunities | Cited in Q2/Q1 as benefiting from EV and emerging tech trends. | Low single-digit industrial growth, strong orders, new product launches. | Sustained resilience with electrification tailwinds. |
ASP consumables growth trajectory | Previously reported double-digit gains; benefits from channel transition. | Mid-single-digit capital growth, strong consumables in North America. | Steady expansion, key revenue driver. |
Proactive cost management, productivity actions, and restructuring | Q2 saw offsetting cost actions and high incremental margins. | Q3 invests $20–30M for productivity; ~60% incremental margins. | Consistently used to preserve margins and fund growth. |
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2025 Outlook
Q: What are your expectations for 2025 growth and margins?
A: Management expects organic growth in all three segments next year, projecting mid-single-digit growth and around 75 basis points of margin expansion. The tax rate is anticipated to increase from 11% to 13%-15%. -
PT Segment Recovery
Q: How is the PT segment performing, and what is the recovery outlook?
A: The PT segment is showing signs of gradual recovery with double-digit orders growth and 8% growth at Tektronix. Management anticipates growth in PT next year but expects a gradual recovery as they move through the year. -
IOS Segment Challenges
Q: Can you discuss the slowdown in the IOS segment and the outlook?
A: The IOS segment experienced low single-digit growth due to hesitation from calibration customers, likely stemming from government uncertainty. Channel partners were hesitant to engage in major marketing programs. Management expects low single-digit growth to continue but remains confident due to high single-digit order growth and improving point-of-sale. -
AHS Consumables Growth
Q: Can you elaborate on the strong performance in AHS consumables?
A: The AHS segment achieved 9% core growth, with the direct sales strategy enhancing customer relationships and boosting capital sales. Provation had a very good quarter with strong SaaS growth. There was a slight headwind from IV bag shortages in October, impacting revenues by a couple of million dollars. -
EA Business Outlook
Q: What's the outlook for the EA business and recovery prospects?
A: The EA business generated about $26 million in the quarter, with similar expectations for the next quarter. Management does not anticipate a significant uptick in the near term due to slow end markets in EV and mobility. Recovery is expected in the back half of next year and into 2026. -
Fluke Performance and Orders
Q: How is Fluke performing amid current market conditions?
A: Fluke demonstrated resilience with low single-digit growth in the industrial business, despite a challenging environment. The company saw high single-digit order growth, and point-of-sale improved throughout the quarter. -
Tektronix Orders and Revenue Impact
Q: When will the positive orders at Tektronix translate to revenue growth?
A: Tektronix experienced high single-digit order growth, indicating an inflection point. Management expects to see the impact on revenue in the late first quarter or early second quarter of next year. -
Spin-off Plans
Q: What's the status of the spin-off plans and potential strategic moves?
A: The company is progressing well with spin-off plans, having staffed teams and initiated recruitment. They remain on track for the fourth quarter of '25 timeframe but are open to evaluating any inbound indications of interest for portions of their portfolio. -
Share Repurchase Plans
Q: Can you provide more details on the share repurchase plans?
A: The company repurchased shares equating to 75% of projected free cash flow in the third quarter and plans to catch up on any shortfall in the fourth quarter. There is no issue with stranded cash, and they intend to maintain this level going forward.