Industrial technology company Fortive (NYSE: FTV) missed Wall Street’s revenue expectations in Q1 CY2025, with sales falling 3.3% year on year to $1.47 billion. Its non-GAAP profit of $0.85 per share was in line with analysts’ consensus estimates.
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Fortive (FTV) Q1 CY2025 Highlights:
- Revenue: $1.47 billion vs analyst estimates of $1.5 billion (3.3% year-on-year decline, 1.4% miss)
- Adjusted EPS: $0.85 vs analyst estimates of $0.85 (in line)
- Adjusted EBITDA: $396 million vs analyst estimates of $398.1 million (26.9% margin, 0.5% miss)
- Management lowered its full-year Adjusted EPS guidance to $3.90 at the midpoint, a 3.9% decrease
- Operating Margin: 15.8%, down from 19.8% in the same quarter last year
- Free Cash Flow Margin: 14.6%, similar to the same quarter last year
- Organic Revenue fell 1.7% year on year (2.5% in the same quarter last year)
- Market Capitalization: $24.71 billion
StockStory’s Take
Fortive’s first quarter results reflected the impact of macroeconomic headwinds and segment-specific challenges, according to management’s remarks. CEO Jim Lico pointed to delayed customer investments in the Precision Technologies segment and continued strength in Intelligent Operating Solutions and Advanced Healthcare Solutions. The quarter was further shaped by supply chain adaptations and ongoing efforts to enhance recurring revenue streams. Management also highlighted the transition of Mark Okerstrom as the new CFO, emphasizing his background in disciplined capital allocation and growth acceleration.
Looking forward, management cited heightened uncertainty from recently announced tariffs and evolving global demand patterns as key factors behind the lowered full-year guidance. Lico described the company’s approach as “pragmatic,” noting plans to accelerate existing supply chain localization and implement strategic price increases to offset cost pressures. The leadership team acknowledged that full mitigation of tariff impacts will phase in gradually, targeting full offset by the fourth quarter. These evolving dynamics, alongside the planned separation of Ralliant, are expected to significantly influence Fortive’s performance in the remainder of the year.
Key Insights from Management’s Remarks
Management identified several factors shaping quarterly results and future expectations, with the most pronounced variance coming from the Precision Technologies segment and the evolving policy environment.
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Precision Technologies Slowdown: The Precision Technologies segment experienced an 8.4% core revenue decline, attributed to delayed customer orders in Test and Measurement due to macroeconomic and policy uncertainty. Management reported that semiconductor and electronics customers, facing tariff-related uncertainties, opted to pause investments, particularly in China and Western Europe.
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Intelligent Operating Solutions Resilience: Intelligent Operating Solutions delivered core revenue growth, supported by stable industrial demand in North America and new product introductions in solar and data center markets. Management credited software and services expansion for supporting margins in this segment.
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Advanced Healthcare Solutions Steady: The Advanced Healthcare Solutions segment achieved core revenue growth, though margins contracted slightly due to unfavorable foreign exchange and investment in new product development. Management cited Provation’s strong software sales and stable demand for infection prevention products as key contributors.
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Tariff Mitigation Playbook: Fortive outlined a multi-pronged response to new tariffs, including pricing actions, supply chain localization, and accelerated manufacturing shifts out of China. The company estimates that approximately two-thirds of mitigation will come from price increases, with the remainder from operational adjustments, aiming for full offset by the fourth quarter of this year.
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Leadership Transition and Separation Progress: The company welcomed Mark Okerstrom as CFO and reaffirmed its plan to complete the Ralliant separation by the end of the second quarter. Management views the separation as a catalyst for focused growth strategies in both resulting entities.
Drivers of Future Performance
For the remainder of the year, Fortive’s outlook is shaped by ongoing supply chain localization efforts, the timing of tariff mitigation, and evolving demand trends across its major segments.
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Tariff Countermeasures Execution: Management expects that the effectiveness and speed of tariff mitigation—including price adjustments and regional manufacturing shifts—will be the central driver of margin recovery in the coming quarters.
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Segment-Specific Demand Patterns: The company anticipates continued stable performance in Intelligent Operating Solutions and Advanced Healthcare Solutions, while recovery in Precision Technologies is expected to be gradual, influenced by R&D investment cycles and customer responses to policy changes.
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Separation of Ralliant: The upcoming spin-off of Ralliant is positioned as a significant event, with the potential to unlock value and enable more targeted growth and capital allocation strategies for both Fortive and the new entity.
Top Analyst Questions
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Scott Davis (Melius Research): Asked about the specifics of supply chain localization in response to tariffs. Management clarified that the strategy involves accelerating existing moves rather than building entirely new capacity, emphasizing flexibility across regions.
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Steve Tusa (JPMorgan): Inquired why the Test and Measurement segment is experiencing greater volatility compared to the broader economy. CEO Jim Lico explained that delayed R&D investments and customer uncertainty, especially among semiconductor and electronics companies, are the main factors.
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Julian Mitchell (Barclays): Sought clarification on the cadence of tariff headwinds and margin progression in Q2. Management confirmed that margin dilution from tariffs will be most acute in Q2, with improvement expected as mitigation measures phase in through the year.
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Joe Giordano (TD Cowen): Asked about competitive positioning in manufacturing, particularly for Tektronix, and the impact of price adjustments on competitive dynamics. Management highlighted global manufacturing flexibility and ongoing efforts to protect intellectual property through geographic diversification.
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Deane Dray (RBC Capital Markets): Questioned cost management actions in Precision Technologies amid headwinds. Management indicated proactive restructuring and ongoing evaluation of incremental cost reductions, but stressed that pricing actions and tariff mitigation are higher priorities for margin stability.
Catalysts in Upcoming Quarters
In the quarters ahead, the StockStory team will closely monitor (1) the pace and effectiveness of tariff mitigation measures, particularly the rollout of price increases and supply chain adjustments; (2) the trajectory of demand recovery in the Precision Technologies segment, especially customer investment cycles in semiconductor and electronics markets; and (3) progress on the Ralliant separation and subsequent updates on strategic priorities for both Fortive and the spun-off entity. The impact of new product launches and expansion into high-growth markets will also be critical markers of execution.
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