A combination of winning acquisitions, lower debt, and strong cash flow makes for a nice cocktail in the business world. Just look at Roper Industries (ROP), a diversified technology and industrial giant. Roper recently completed a $209 million acquisition of Northern Digital, a provider of 3D measurement technology for medical applications. In 2010, it paid $525 million in cash iTradeNetwork, a software technology catering to the food industry, from Accel-KKR, just to name two purchases.
For the first quarter of 2011, diluted earnings per share hit 91 cents, as net earnings reached $89 million, a 49 percent increase over the same period in 2010. Sales rose by 21 percent to $645 million and orders increased 24 percent to an all-time record of $702 million, the company says.
"With another solid quarter of cash generation, we reduced our outstanding debt by nearly $100 million, bringing net-debt-to-net capitalization to 25 percent and providing the company with over $800 million in available liquidity. Our acquisition pipeline is full and we see interesting opportunities for the remainder of the year,” says Roper Industries Chairman, President and CEO Brian Jellison.
Standard & Poor's credit analyst John Sico describes Roper Industries as a firm with a "satisfactory business profile, which is marked by leading positions in profitable niche markets, and by its broad product, end-market, and geographic diversity."
More recently, Moody's Investors Service upgraded Roper's senior unsecured rating to Baa2 from Baa3, upgraded its senior subordinate rating to Baa3 from Ba1, and changed the ratings outlook to stable from positive.
A stable ratings outlook means the rating is unlikely to change within the next 12 to 18 months.
"The upgrade of Roper's senior unsecured rating reflects the continued improvement in its financial results following the relatively large acquisition of iTradeNetworks in mid 2010," says Darren Kirk, vice president and senior analyst with Moody's.
"The associated increase in financial leverage incurred to fund this acquisition has quickly been reduced through Roper's strong earnings growth and significant free cash flow generation."
Still, some might see the company in need of a breather. Oppenheimer recently downgraded its recommendation on the company's stock to perform from outperform.
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