Why This Fortive Analyst Is No Longer Bullish

Fortive Corp (NYSE: FTV) is poised for continued recovery in its core business and earnings accretion from deals over the next 12 to 18 months, according to Morgan Stanley, which downgraded the stock on a valuation basis Wednesday.

The Fortive Anlayst: Joshua Pokrzywinski downgraded Fortive from Overweight to Equal-Weight and maintained the price target at $75.

The Fortive Thesis: Following a substantial rerating of the company’s stock, the risk-reward seems “more balanced,” Pokrzywinski said in the downgrade note.

“The company's short-cycle markets are inflecting and posted solid upside in 4Q,” the analyst said, while expressing optimism around Fortive’s prospects over the next 12 to 18 months.

“That said, we see less upside from multiple expansion due to derating of other premium peers, less differentiated medium-term revenue growth versus other cyclicals, and some risk that M&A is viewed as too expensive given a focus on premium/software assets,” he said.  

“As cyclical and thematic forces become better reflected elsewhere in industrials, we see FTV's through-the-cycle quality as coming back into focus.” 

FTV Price Action: Shares of Fortive were down 3.9% at $67.09 at last check. 

(Photo: Fortive)