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Fortive Corporation (NYSE:FTV) delivered stronger-than-expected third-quarter results for 2025, exceeding analyst projections despite ongoing challenges from tariff pressures and segment performance variations. The industrial technology company, currently valued at $16 billion, continues to navigate a complex operating environment while preparing for its planned spin-off of Precision Technologies. According to InvestingPro data, Fortive has maintained impressive gross profit margins of 59.7% over the last twelve months.
Recent performance highlights
Fortive reported third-quarter adjusted earnings per share (EPS) of $0.68, significantly outperforming both the Street’s expectation of $0.56 and analyst estimates of $0.58. Sales came in 2% above forecasts, while adjusted EBITDA exceeded projections by $0.08, with both company segments contributing to the outperformance.
This strong showing prompted management to raise its full-year EPS guidance for fiscal year 2025, suggesting confidence in the company’s ability to maintain momentum through year-end. The fourth-quarter EPS guidance also sits above Street expectations, indicating a potentially strong finish to the year.
The positive third-quarter results represent a notable improvement from earlier in 2025. In May, Fortive had reduced its EPS guidance by approximately 3.9% (16 cents), citing weaker demand in Test & Measurement and challenges related to tariffs. The recent outperformance suggests the company has made progress addressing these issues.
Strategic transformation underway
A key development for Fortive is the planned spin-off of its Precision Technologies (PT) business as Ralliant, scheduled for the second quarter of 2025. This strategic move aims to create more focused entities and potentially unlock shareholder value, though analysts note that investors may continue to perceive Fortive as having a complex portfolio even after the split.
The company appears to be pursuing different capital allocation strategies for its businesses. Fortive remains committed to bolt-on merger and acquisition (M&A) activities, while Ralliant (RAL) is expected to prioritize capital returns to shareholders over M&A initiatives.
Analysts suggest that investors may be undervaluing RAL within Fortive’s current share price, with some analyses indicating that RAL is effectively included "for free" at recent trading levels. This potential undervaluation could present an opportunity as the spin-off approaches.
Growth outlook and financial projections
Looking ahead to 2026, analysts project double-digit percentage EPS growth for Fortive, partly driven by a mid-single-digit percentage reduction in EPS share count acting as a tailwind. This outlook suggests the company may be positioned for accelerated earnings growth after navigating the challenges of 2025.
The company’s organic sales Compound Annual Growth Rate (CAGR) ambitions are described as realistic, particularly for Fortive itself and its Ralliant subsidiary. Some analysts note that the organic sales CAGR guidance may be more conservative than in past years, potentially setting the stage for positive surprises if execution exceeds these targets.
Fortive’s sensors division has been highlighted as an area with high growth potential, while the Test & Measurement segment is showing signs of sequential improvement. There are also indications of recovery in industrial manufacturing at Ralliant, which could contribute to improved performance.
Operational challenges
Tariff exposure remains a significant challenge for Fortive. The company has identified gross tariff exposure between $190-$220 million, representing approximately 8% of cost of goods sold (COGS). Management plans to mitigate two-thirds of this impact through pricing strategies and the remainder through sourcing and localization efforts.
Despite these mitigation plans, analysts anticipate a net tariff headwind to EPS in 2025 amounting to $0.10. This external pressure comes at a time when Fortive is also dealing with softer demand in certain segments, particularly in Precision Technologies earlier in the year.
The combination of tariff impacts and demand fluctuations has created a more challenging operating environment, requiring management to adjust guidance and implement strategic responses throughout 2025.
Market perception and valuation
Analysts note that despite solid financial metrics and a more disciplined capital allocation strategy, Fortive continues to trade at a discount to the Multi-Industry average. This discount is viewed by some as unjustified given the company’s fundamentals.
The planned spin-off of Precision Technologies may help address this valuation gap, though concerns persist about whether investors will continue to view Fortive as having a complex portfolio even after the separation is complete.
Bear Case
How might persistent tariff headwinds impact Fortive’s profitability beyond 2025?
While Fortive has identified mitigation strategies for its $190-220 million tariff exposure in 2025, the longer-term impact remains a concern. The company plans to offset two-thirds of the tariff impact through pricing actions, with the remainder addressed through sourcing and localization efforts. This approach may face challenges if customers resist price increases in a competitive market environment.
The $0.10 EPS headwind from tariffs in 2025 could extend into future years if global trade tensions persist or escalate. Fortive’s ability to maintain margins while absorbing these costs presents an ongoing challenge that may limit earnings growth potential. The effectiveness of localization efforts and supply chain adjustments will be critical in determining whether tariff impacts become a structural drag on profitability or a temporary hurdle.
Could weaker demand in key segments undermine growth projections?
Fortive reduced its EPS guidance in May 2025 due to weaker demand in Test & Measurement and challenges at its Precision Technologies division. While recent quarters have shown improvement, there remains uncertainty about the sustainability of this recovery.
The company’s conservative organic sales CAGR guidance suggests management may be cautious about near-term growth prospects. If demand weakness extends beyond current expectations, particularly in the Test & Measurement segment, Fortive may struggle to achieve its projected double-digit EPS growth in 2026. The anticipated V-shaped recovery for Ralliant also remains speculative and dependent on broader industrial manufacturing trends that could be affected by macroeconomic factors.
Bull Case
How could Fortive’s conservative guidance create potential upside surprises?
Analysts have characterized Fortive’s organic sales CAGR guidance as potentially more conservative than in past years. This approach creates a lower bar for the company to exceed expectations, potentially leading to positive earnings surprises if execution is strong. The recent Q3 2025 results, which significantly outperformed both company and Street expectations, demonstrate this potential for upside.
Management’s decision to raise full-year EPS guidance following the strong Q3 performance indicates increasing confidence in the business outlook. If the company continues to execute effectively on its tariff mitigation strategies and benefits from improving conditions in key segments, actual results could meaningfully exceed the conservative targets. This pattern of under-promising and over-delivering could drive positive sentiment and potentially lead to valuation expansion.
How might the spin-off of Precision Technologies unlock shareholder value?
The planned spin-off of Precision Technologies as Ralliant in Q2 2025 represents a significant catalyst for potential value creation. Analysts suggest that investors may be undervaluing RAL within Fortive’s current share price structure, with some analyses indicating RAL is effectively included "for free" at recent trading levels.
Separating the businesses could allow each entity to pursue more focused strategies aligned with their specific market opportunities. Fortive’s commitment to bolt-on M&A contrasts with Ralliant’s expected prioritization of capital returns to shareholders, potentially appealing to different investor preferences. The increased transparency and strategic clarity resulting from the separation may help address the "complex portfolio" perception that has contributed to Fortive’s valuation discount relative to industry peers, ultimately allowing both companies to trade more in line with their respective fundamentals.
SWOT Analysis
Strengths
Q3 2025 performance significantly exceeded analyst expectations
Raised full-year EPS guidance demonstrating confidence in outlook
Strong financial metrics compared to industry averages
High growth potential in sensors division
Disciplined capital allocation strategy
Weaknesses
Perceived complex portfolio structure affecting valuation
Tariff exposure impacting margins and earnings
Performance softness in Precision Technologies earlier in 2025
Trading at a discount to Multi-Industry average
Opportunities
Planned spin-off of Precision Technologies as Ralliant could unlock value
Signs of recovery in industrial manufacturing at Ralliant
Conservative guidance creates potential for positive surprises
Double-digit EPS growth projected for 2026
Sequential improvement in Test & Measurement segment
Threats
Tariff headwinds ($190-220 million exposure, 8% of COGS)
Potential for continued weak demand in certain segments
Investor skepticism about portfolio complexity even post-split
Competitive pressures in industrial manufacturing
Execution risks associated with the planned spin-off
Analysts Targets
Barclays - October 30th, 2025 - Equal Weight - $56.00
Barclays - June 11th, 2025 - Overweight - $86.00
Barclays - June 3rd, 2025 - Overweight - $86.00
RBC Capital Markets - May 2nd, 2025 - Sector Perform - $72.00
Barclays - May 2nd, 2025 - Overweight - $85.00
This analysis is based on information available through October 30, 2025.
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