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Investing.com - TD Cowen downgraded Fortive (NYSE:FTV) from Buy to Hold on Tuesday, while significantly reducing its price target to $50.00 from $85.00. The stock, currently trading at $52.17, appears undervalued according to InvestingPro’s Fair Value model.
The rating change follows the completion of Fortive’s spin-off of its Retail Automation Logistics (RAL) business, which TD Cowen initiated with a Buy rating in a separate action. The $17.7 billion market cap company maintains impressive gross profit margins of 60%.
TD Cowen cited concerns about Fortive’s growth trajectory, noting that the company’s strongest business unit is decelerating after a period of robust performance, while other segments are struggling to meet expectations and lagging behind competitors.
The research firm acknowledged that Fortive has lowered performance expectations with two recent guidance cuts at a time when industry peers have not made similar reductions, which has reset the bar for the company’s future results.
While TD Cowen indicated that Fortive’s share buyback program provides some support for the stock, the firm ultimately concluded that better investment opportunities exist elsewhere in the market.
In other recent news, Fortive Corporation has completed the spin-off of its Precision Technologies segment, resulting in the creation of Ralliant Corporation, which now trades under the symbol "RAL" on the NYSE. This strategic move has led to Fortive estimating its second-quarter revenue and core revenue to be flat to slightly down, with the spun-off segment experiencing a mid-single-digit decline. Despite these challenges, Fortive expects its second-quarter consolidated adjusted earnings per share to remain near the midpoint of its previous guidance range. Following the spin-off, Olumide Soroye has taken over as President and CEO, succeeding James Lico, who will stay on as a non-executive senior advisor until the end of the year.
JPMorgan has reiterated an Overweight rating on Fortive, setting a price target of $65, citing the company’s nearly 5.5% free cash flow yield as a standout feature. The firm considers Fortive a value opportunity in a sector they describe as expensive, projecting a 23% upside potential for the stock. Citi has also raised its price target for Fortive to $59 while maintaining a Neutral rating, noting potential for healthy growth and strong free cash flow over time. Meanwhile, Raymond (NSE:RYMD) James has lowered its price target to $65 from $90, maintaining an Outperform rating, and highlighted the company’s simplified business structure post-spin-off as a positive development. These analyst updates reflect the mixed sentiment and cautious optimism surrounding Fortive’s recent corporate restructuring and future prospects.
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