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Fortive Corporation (NYSE:FTV) reported its first quarter 2025 results on May 1, showing resilience in select segments despite overall revenue contraction. The industrial technology company delivered adjusted earnings per share at the midpoint of guidance while navigating macroeconomic headwinds and preparing for its upcoming separation into two independent companies.
Executive Summary
Fortive reported Q1 2025 revenue of $1.47 billion, representing a 3% decline in total growth and a 2% decline in core growth compared to the same period last year. The company’s Intelligent Operating Solutions (IOS) and Advanced Healthcare Solutions (AHS) segments showed positive momentum with combined growth of 2.2%, while Precision Technologies (PT) experienced a significant 8.4% core decline.
"We delivered solid Q1 performance despite a dynamic macro environment," the company stated in its presentation, highlighting adjusted operating margin expansion of 20 basis points despite lower revenue. Adjusted earnings per share grew 2% to $0.85, while adjusted free cash flow reached $222 million.
The company also outlined its strategy for addressing an estimated $190-220 million in incremental tariff impacts through pricing actions, supply chain optimization, and cost reduction measures. Fortive updated its full-year 2025 guidance to reflect moderated demand in its Precision Technologies segment and tariff impacts.
Quarterly Performance Highlights
Fortive’s performance showed significant divergence across its business segments. The Intelligent Operating Solutions segment delivered 2.0% core growth and 0.9% total growth, with revenue reaching $671 million. The segment’s adjusted operating profit margin expanded significantly to 33.3% from 31.8% in the prior year, driven by software and recurring revenue businesses.
The Advanced Healthcare Solutions segment achieved 2.5% core growth and 0.8% total growth, with revenue of $302 million. While the segment saw robust software growth driven by continued SaaS conversions, its adjusted operating profit margin declined slightly to 23.5% from 24.2%, as investments for growth and unfavorable foreign exchange more than offset volume leverage.
The Precision Technologies segment faced significant challenges, with core revenue declining 8.4% and total revenue falling 10.5% to $501 million. The segment’s adjusted operating profit margin contracted to 21.8% from 24.4% in Q1 2024. The company attributed this underperformance to tough comparisons from the previous year and customer order delays, noting that the segment performed below its mid-single-digit core growth expectation.
"Test & measurement core decline (high-teens) reflects tough comp and customer order delays," Fortive explained, while highlighting "continued strong demand in sensors & safety systems."
Tariff Impact & Mitigation Strategy
A significant portion of Fortive’s presentation focused on navigating the current trade environment, particularly the impact of tariffs. The company estimates gross incremental tariff impacts of $190-220 million, with the largest exposure coming from China at $165-175 million.
To address these challenges, Fortive outlined a comprehensive countermeasure playbook including pricing actions and surcharges, leveraging existing sourcing strategies, optimizing production and logistics, and implementing cost and productivity initiatives. The company noted it has already reduced exposure to imports from China by 70% since 2018.
"Expect to fully offset the estimated tariff exposure by Q4, completely mitigate in 2026," the company stated, indicating that pricing actions are being implemented throughout Q2 while supply chain and manufacturing actions are being accelerated.
Separation Progress & Outlook
Fortive confirmed that its planned separation into two independent companies—"New Fortive" and "Ralliant"—remains on track to be completed by the end of Q2 2025. The Form 10 is expected to be filed in early May with pro forma financials, followed by investor days for both companies scheduled for June 10th at the NYSE.
The company also announced the appointment of Mark Okerstrom as CFO of Fortive, effective March 24th, as part of the separation preparation.
For the upcoming quarter, Fortive expects adjusted EPS of $0.85 to $0.90, with key assumptions including continued PT/Ralliant core decline with modest sequential improvement, steady growth in IOS/AHS segments, and operating margins pressured by tariffs as mitigation actions phase in throughout the quarter.
For the full year 2025, the company revised its adjusted EPS guidance to $3.80 to $4.00, reflecting moderated demand at PT/Ralliant while expecting durable growth at "New Fortive" and offsetting tariff impacts. Both "New Fortive" and Ralliant will provide updated guidance following the separation.
Strategic Initiatives
Fortive emphasized its track record of durable growth through innovation and diversification. A multi-year view of revenue shows steady growth for both "New Fortive" and "Ralliant" from 2020 through 2024, with "New Fortive" achieving mid-single-digit core growth CAGR over the five-year period.
The company highlighted strategic actions to enhance durability, including continued diversification and geographic expansion into attractive growth markets, accelerated innovation aligned to favorable secular trends, increased recurring revenue profile, and resilient margins and free cash flow.
Forward-Looking Statements
Looking ahead, Fortive faces a challenging environment with trade and macro uncertainty delaying recovery in its Precision Technologies segment as customers postpone spending decisions. However, the company remains confident in its ability to navigate these challenges through its Fortive Business System (FBS) playbook.
"Proven FBS playbook to rapidly countermeasure headwinds," the company noted, while acknowledging that its updated FY 2025 guidance reflects "moderated demand at PT" and includes the net tariff impact.
The separation into two independent companies represents a significant milestone for Fortive, with management expressing confidence that both entities will be well-positioned for future growth. The upcoming investor days in June will provide more detailed insights into the strategies and financial outlooks for both "New Fortive" and "Ralliant" as they prepare to operate as standalone companies.
As Fortive navigates the remainder of 2025, investors will be closely watching how effectively the company implements its tariff mitigation strategies and whether the Precision Technologies segment shows signs of recovery in the second half of the year.
Full presentation:
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