Zacks' Bear Of The Day: FLIR Systems

| About: FLIR Systems, (FLIR)

FLIR Systems (FLIR) recently reported its third consecutive earnings miss. Management also provided 2014 guidance below consensus, prompting a flurry of negative estimate revisions from analysts.

It is a Zacks Rank #5 (Strong Sell).

Despite the disappointing financial results, shares of Flir Systems trade at a premium to their peers on a forward P/E basis. Investors should consider avoiding this stock until its earnings momentum improves.

FLIR Systems designs, manufactures, and markets sensor systems used in a variety of thermal imaging, situational awareness, and security applications.

Fourth Quarter Results

FLIR Systems delivered disappointing Q4 results on February 7. Adjusted EPS came in at 35 cents, missing the Zacks Consensus Estimate of 39 cents. It was a -30% decrease from the same quarter last year.

Revenue rose 4% to $400.3 million as strength from its 'Commercial Systems' division offset weakness in 'Government Systems'. CEO Andy Teich stated that its sales "were impacted by slowed activity from domestic defense customers".

Estimates Falling

Following its Q4 results, management provided soft guidance for 2014. The company expects adjusted EPS between $1.40 and $1.50, which was below the Zacks Consensus Estimate at the time. This prompted analysts to unanimously lower their estimates for 2014, and many also revised their estimates downward for 2015.

The Zacks Consensus Estimate for 2014 is now $1.48, which is within guidance and down from $1.65 just 30 days ago. The 2015 estimates is currently $1.76, down from $1.82 over the same period.

Flir Systems has reported three straight earnings misses dating back to the second quarter of 2013. You can see the steady decline in consensus estimates for the company over that stretch in its 'Price & Consensus' chart:

Pricey Valuation

Shares of Flir Systems are down about -8% since January 22. But the stock still doesn't look cheap at 20x 12-month forward earnings. That's a premium to its 10-year historical median of 19x and the industry median of 14x.

The Bottom Line

With earnings estimates on a downward trend and shares trading at a premium, investors should consider avoiding FLIR Systems until its earnings momentum turns around.

Todd Bunton, CFA is the Growth & Income Stock Strategist for Zacks Investment Research and Editor of the Income Plus Investor service.

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