- Q4 Growth Metrics: Core growth of 3%, adjusted EBITDA growth of 8% ($358M), and adjusted EPS growth of 13% (90¢) in Q4 2025.
- Capital Allocation: Repurchased $1.3B of shares in the last two quarters, maintaining a strong balance sheet with 2.6x gross debt to adjusted EBITDA.
- 2026 Guidance: Full-year adjusted EPS guidance of $2.90–$3.00, 2–3% core revenue growth, and 50–100 bps EBITDA margin expansion.
- Free Cash Flow: Achieved over 100% free cash flow conversion in 2025, supporting disciplined capital allocation and shareholder returns.
- Segment Performance: Fluke drove iOS growth with double-digit ARR, while AHS faced margin pressure from reinvestments but expects 2026 improvement.
Segment Performance
The Intelligent Operating segment saw a 4% organic growth, driven by excellent execution by the Fluke team and strong demand in areas like data center applications and defense. The Advanced Healthcare Solutions segment saw margin pressure in Q4 due to reinvestments, but this is considered a localized issue and not a multi-year problem.
Guidance and Outlook
Fortive guided for full-year adjusted EPS of $2.90 to $3.00 per share in 2026, with core revenue growth in the range of 2% to 3%. The company expects to see a 300 basis point tailwind from FX in the first quarter. The guidance implies a continued focus on organic growth and targeted bolt-on deals.
Valuation
Using the current P/E Ratio of 32.85 and EV/EBITDA of 19.82, it appears that Fortive's valuation is relatively high. However, the company's strong track record of execution and growth, as well as its commitment to delivering strong performance for shareholders, may justify the premium. Analysts estimate next year's revenue growth at 3.8%, which is slightly higher than the company's guidance.
EPS Performance
The actual EPS of $0.581 in Q4 was lower than estimates of $0.83, which may indicate some pressure on the company's profitability. However, the company's adjusted EPS growth of 13% in Q4 suggests that the underlying business is performing well.