Fortive Corp Q1 2025 Earnings Call Summary

The following is excerpted from the question-and-answer section of the transcript.

Question: Scott Davis - Melius Research - Analyst : Jim, we hate to see you go. It's been a pleasure and a great nine years. I hope you enjoy retirement. Don't be a stranger. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 01, 2025 / 4:00PM, FTV.N - Q1 2025 Fortive Corp Earnings Call

Question: Scott Davis - Melius Research - Analyst : But I'll see you in June anyway. So look, I just wanted to beat this horse a bit on tariffs just because it's been on every call. You mentioned localizing production. Just wanted to kind of explicitly understand what you mean by that. Are you talking about building out new capacity in the US? Or can you just modulate your capacity back to perhaps where it's needed?

Question: Scott Davis - Melius Research - Analyst : Okay. Makes sense. And just wanted to ask on Test and Measurement. I mean, it's one of the bigger declines I've seen in that business I can remember and we take a pretty deep recession to find anything comparable to that. But how much of that business has just been kind of pushed to the right versus perhaps some real air pockets in demand there?

Question: Stephen Tusa - JPMorgan Chase & Co - Analyst : Thanks again for everything. I think we've been this before, but good luck in the future. I'm just trying to figure out why, I guess, like the test and measurement industry just seems to be having a bit more volatility in and around the end of the quarter, call it, maybe some preordering or pausing. We're not really seeing that in the rest of the economy. What's your kind of take on why this particular vertical of devices is seeing this type of performance versus maybe the rest of the economy?

Question: Stephen Tusa - JPMorgan Chase & Co - Analyst : Okay. And did you -- in any other businesses like Fluke, did you see any kind of unusual buying behavior around the end of the quarter or kind of into April here? Anything unusual in those types of businesses, the more industrial, commercial type businesses?

Question: Julian Mitchell - Barclays Investment Bank - Analyst : Jim, thanks very much for the help and I wish you well in retirement and also welcome to Mark. Maybe just wanted to start, I suppose, with Q2 because that's the last sort of full quarter of Fortive in its current condition. So just to understand the guide a little bit, it's sort of embedding, I think, what maybe a low single-digit sequential revenue increase in both New Fortive and Ralliant, and then maybe kind of flattish margins sequentially because you've got a big tariff headwind. Is that the right way to think about it, that Q2, you get maybe, I don't know, $0.06 or something of the $0.10 tariff headwind that you guided for the year?

Question: Julian Mitchell - Barclays Investment Bank - Analyst : That's great. And then just my second quick follow-up would be around the Healthcare business. So you had some margin decline in the first quarter year-on-year with sales up. I see the reference to sort of FX and probably that effect goes away the balance of the year. But is that sort of reinvestment element something that lasts all year that will weigh on the Healthcare margins or it's something specific in early in the year?

Question: Joseph Giordano - TD Cowen - Analyst : Can I start on PT? Can you talk us through the -- like where they're manufacturing and how that compares to competition? Just wondering like as you adjust prices for tariffs there, like is there any sort of competitive imbalance versus a competitor that might be manufacturing in the United States?

Question: Joseph Giordano - TD Cowen - Analyst : I'm more talking Tek, I apologize for that.

Question: Joseph Giordano - TD Cowen - Analyst : On AHS, I mean, I know there's a little bit of a couple of fewer days, and it makes sense the comments you just made on the margins. But I think on the core growth side, I doubt anyone had [2.5]. Like was that below what you guys were thinking? Like I think the view was kind of comfortably in the mid-singles there. So if there's anything that's -- REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 01, 2025 / 4:00PM, FTV.N - Q1 2025 Fortive Corp Earnings Call

Question: Jeffrey Sprague - Vertical Research Partners - Analyst : Jim, best of luck in whatever is next. Just coming back to tariffs, and I'm sorry, I was on a touch late and got dropped on the call. Is the number you're sharing with us today the annualized rate or the in-year rate? And can you just clarify how much of it you think you're offsetting in 2025?

Question: Jeffrey Sprague - Vertical Research Partners - Analyst : And then the US exports to China, are those Fortive finished goods to Chinese customers where actually maybe that $90 million to $95 million isn't really a cost item but it's just sort of a demand destruction item? Can you just clarify that?

Question: Jeffrey Sprague - Vertical Research Partners - Analyst : And then also just some further clarification on what you're expecting here. Jim, you mentioned July 9. Are you expecting that the tariffs that are on 90-day hold actually come back fully on, on July 9? Can you just clarify what you --

Question: Jeffrey Sprague - Vertical Research Partners - Analyst : So wouldn't the rest of the world -- so everything has got kind of a base 10 then, right? I mean, wouldn't those rest of world numbers actually be even more than that? Maybe it's de minimis?

Question: Jeffrey Sprague - Vertical Research Partners - Analyst :

Question: Brad Hewitt - Wolfe Research LLC - Analyst : This is Brad Hewitt on for Nigel Coe. Just curious if you could walk through your assumptions by segment both for Q2 and the back half of the year in terms of core growth and margins.

Question: Brad Hewitt - Wolfe Research LLC - Analyst : Okay, that's helpful. And then you guys called out the mid-single-digit core growth in FAL in Q1. Just curious if you could break that down between the two businesses. And then within FAL, are you seeing any pockets of hesitancy from government customers?

Question: Andrew Obin - BofA Securities - Analyst : Jim, thank you for all your help over the years. It's been a pleasure. Just to clarify, so Tek orders were positive in the first quarter and you haven't seen things worsen in April, but you are assuming fewer deals in the pipeline convert in the rest of the year. Is that right? Just to clarify that.

Question: Andrew Obin - BofA Securities - Analyst : Okay. And just could you remind us just how is Tektronix different versus Keysight or Anritsu? Because I think Anritsu reported March quarter, Keysight get it like a couple of months back but just there is a disconnect. What end market really differentiates you from the competitors? Just remind us.

Question: Andrew Obin - BofA Securities - Analyst : Really appreciate it. And just a follow-up on your footprint. So are you keeping CapEx, and I know it's still for the combined entity and I know we're going to separate. But is the implication that the CapEx for '25 staying flat, going up, going down, when all is said and done with your actions?

Question: Andy Kaplowitz - Citigroup Inc - Analyst : Jim, thanks for your help. Mark, welcome. Just I think, Jim, you mentioned Sensors and Systems, you said, increased backlog, but can you talk about the shipping delays you saw on the defense side? I think that's not necessarily a new phenomenon for you. So what's the visibility you have to that improvement that I think you talked about in the second half of the year? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 01, 2025 / 4:00PM, FTV.N - Q1 2025 Fortive Corp Earnings Call

Question: Andy Kaplowitz - Citigroup Inc - Analyst : Very helpful. And then, Jim, I just want to dig into the sales by region for Fortive. I know prior to this quarter, you already expected China to be down. What are you thinking now and what are you thinking for North America and Western Europe?

Question: Chris Snyder - Morgan Stanley - Analyst : Appreciate all the help and best of luck going forward. On the price cost, I think of the $200 million growth, you guys talked about $80 million -- or sorry, 80% recovery. So I guess of that, I guess, $160 million, any way to think about how much of it is coming from price, how the price flows through and from like a cadence perspective in the coming quarters? And then when you guys talk about completely mitigating the tariffs in '26, is that at a margin percentage level? Is that a dollar level?

Question: Chris Snyder - Morgan Stanley - Analyst : Yes. No, absolutely. I appreciate all of that color. And then maybe following up on Precision Tech. Could you provide an update on EA Elektro? I would imagine that turning organic here in Q1 led to some of the pressure on PT organic in the quarter. So any just color on how that business did in Q1? And then what does the guide assume for EA Elektro for the full year?

Question: Deane Dray - RBC Capital Markets - Analyst : Best of luck, Jim. You and I go way back to your Danaher days so I appreciate it. And welcome to Mark. My question is on, just given the headwinds at PT, I didn't hear anything about taking any cost-out repositioning, given these headwinds. The FBS playbook would be to kind of try to manage decrementals in line with all off in demand. I know you've got a spin happening so maybe that complicates things. But just can you address about any opportunity here to take some costs out?

Question: Deane Dray - RBC Capital Markets - Analyst : Got it. And just a last quick one comment in the prepared remarks about growth investments. Can you size that? Where is it across the segments? And have you throttled any of those back?

Question: Andrew Buscaglia - BNP Paribas Asset Management - Analyst : I was hoping you guys can update us on some of the software trends you're seeing. It sounds like it's going well in Advanced Healthcare. Hard to sort of see it in the margins with the growth of investments. In IOS, obviously, you can see it in the margins the last couple of years. But we're seeing kind of conflicting comments when you look across the software industry. I'm not a software analyst but you see some mix, sort of mix trends. So I'm wondering, how are those businesses handling the tariff situation? And can you just talk about the latest you're seeing there?

Question: Andrew Buscaglia - BNP Paribas Asset Management - Analyst : Okay, yes. That's helpful. Last question, probably a silly one, but you had a bigger buyback in the quarter than I was expecting. With the stock where it is, what did you see in the last few months here before the spin occurred? Still plan to allocate a fair amount in that direction? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 01, 2025 / 4:00PM, FTV.N - Q1 2025 Fortive Corp Earnings Call