Fortive Corp Q1 FY2025 earnings call

Elena Rosman welcomed everyone and introduced Jim Lico and new CFO Mark Okerstrom. Jim Lico discussed Fortive's solid first quarter performance with adjusted EPS of $0.85, margin expansion, strong cash flow, and share repurchases. He noted challenges in Precision Technologies due to macro and political uncertainty, but progress in supply chain resilience and tariff countermeasures. The separation towards end of second quarter was mentioned, along with innovation and recurring revenue profile.

Fortive's first quarter performance had varied segment results. Intelligent Operating Solutions (IOS) core revenue grew 2%, with Fluke having low single-digit growth, Facilities and Asset Lifecycle growing mid-single digit, and ServiceChannel seeing traction. Adjusted operating margins for IOS expanded 150 basis points in the quarter. Advanced Healthcare Solutions (AHS) core revenues grew 2.5%, with infection prevention growing mid-single digit and software growth at Provation, though adjusted operating margins contracted 70 basis points but were up 125 basis points on a 2-year stack. Precision Technologies (PT) core revenue declined 8.4%, with Test and Measurement down high teens and Sensors and Safety Systems having low-single-digit growth but shipment delays, and adjusted operating profit margins contracting 260 basis points.

Second quarter adjusted EPS is expected in the range of $0.85 to $0.90. For 2025, adjusted EPS range is $3.80 to $4, with PT core revenue expected to be down low single digit and New Fortive core growth maintained with contingencies. Tariff mitigation is expected to fully offset the estimated exposure by the fourth quarter of 2025 and be neutral in 2026.

Macro and political uncertainty impacting Precision Technologies, tariff impact and challenges in mitigation, supply chain constraints and government approval delays in Precision Technologies' Sensors and Safety Systems business.

Q: Please explain what is meant by localizing production regarding tariffs?

A: We've been derisking supply chain over years, and will accelerate existing plans, including manufacturing in various regions like the US.

Q: What's the reason for the decline in Test and Measurement?

A: Customers are delaying investments due to uncertainty, tariffs, and exposure to semiconductor/electronics.

Q: What's the tariff impact and offset?

A: The 2025 impact is at the midpoint of $200 million, and we expect to offset about 80% of it by the end of 2025.