Recurring Software Trends Will Secure Resilience Amid Tariff Uncertainty

Analysts have lowered their fair value estimate for Fortive to $56.13 from $57.25. They cite a tougher outlook and more challenging revenue growth projections for the remainder of the year.

Analyst Commentary

Following Fortive's updated guidance, analysts have offered a range of perspectives highlighting both potential opportunities and concerns for the company in the coming quarters.

Bullish Takeaways

Bullish analysts point to Fortive's ongoing focus on disciplined execution, which could support bottom-line stability despite a more challenging economic backdrop.
The company's established market position and diversified portfolio are seen as providing resilience during periods of slower growth.
Several analysts note that any outperformance in the second half of the year could offer upside to current valuation estimates, particularly if demand trends improve across key end markets.

Bearish Takeaways

Bearish analysts express caution about Fortive's ability to meet its current revenue guidance, noting that management’s update implies a steep ramp in performance over the remainder of the year.
There are concerns that recent peer results do not support an optimistic outlook for the sector, making Fortive's targets appear especially ambitious.
Uncertainty around macroeconomic conditions and execution adds pressure on valuation, with some expecting muted growth to persist and further limit upside.
Adjustments to price targets reflect skepticism that Fortive can overcome near-term headwinds without additional catalysts for growth.

What's in the News

Fluke Corporation, a subsidiary of Fortive, announced the launch of the Fluke GFL-1500 Ground Fault Locator. This new tool is designed to help solar technicians locate ground faults more quickly and safely, reducing costly downtime and improving workplace safety (Key Developments).
Fortive's Board of Directors declared a regular quarterly cash dividend of $0.06 per share. The dividend is payable on September 26, 2025 to shareholders of record as of September 12, 2025 (Key Developments).
Fortive completed the repurchase of 1,897,322 shares, amounting to 0.56% of shares outstanding for $134.99 million, as part of its broader buyback program initiated in February 2022 (Key Developments).

Valuation Changes

The Fair Value Estimate has decreased from $57.25 to $56.13, reflecting lower expectations for the company's intrinsic value.
The Discount Rate has risen slightly from 8.69% to 8.83%, suggesting a moderately higher perceived risk or required return.
The Revenue Growth Projection has declined from -9.87% to -10.04%, indicating a more cautious outlook for top-line performance.
The Net Profit Margin has fallen from 16.00% to 15.20%, pointing to anticipated pressure on profitability.
The Future Price-to-Earnings (P/E) Ratio has increased from 31.94x to 33.27x, implying the stock may be trading at a higher multiple of expected earnings despite the softer fundamentals.

Expansion of recurring revenues, digital innovation, and smart industry trends are set to drive sustained growth, increased margins, and market expansion.
Operational discipline, strategic acquisitions, and backlog conversion are expected to boost cost efficiency and support near-term earnings recovery.
Greater segment concentration, fiscal tightening, trade volatility, M&A execution risk, and healthcare headwinds heighten uncertainty for revenue growth, margin stability, and future earnings quality.

Catalysts

About Fortive

Designs, develops, manufactures, and markets products, software, and services in the United States, China, and internationally.What are the underlying business or industry changes driving this perspective?

Fortive's increasing mix of recurring revenues-now at 50%-through expansion of software, services, and subscription models, including double-digit ARR growth at key brands like Fluke and SaaS momentum at AHS, is expected to drive improved revenue visibility and margin expansion in future periods, supporting both top-line growth and higher net margins.
The company is positioned to benefit from long-term infrastructure investment, smart city, and industrial automation trends, as evidenced by robust demand for building automation, reliability solutions, and advanced measurement tools, which are anticipated to expand Fortive's addressable markets and accelerate revenue growth over the medium to long term.
Successful execution of the Fortive Accelerated strategy, with an explicit focus on innovation (e.g., AI-enabled customer experience upgrades, launch of award-winning instrumentation, strong new product funnels), is aimed at leveraging digital transformation and increasing IoT adoption across end markets, supporting sustained future revenue growth and margin improvement.
Ongoing operational excellence via the Amplified Fortive Business System and disciplined capital allocation-including targeted bolt-on acquisitions in niche software and analytics-are expected to deliver further cost productivity, improved net margins, and robust free cash flow conversion.
Tariff-related cost pressures and temporary customer demand deferrals in Q2 have caused near-term revenue volatility and may be weighing on valuation, but management expects deferred orders (building backlog) to convert in subsequent quarters and for full implementation of pricing and supply chain countermeasures to restore or improve gross margins and earnings, providing a near-term catalyst for earnings normalization and potential upside.

Fortive Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming Fortive's revenue will decrease by 9.8% annually over the next 3 years.
Analysts assume that profit margins will increase from 12.5% today to 16.5% in 3 years time.
Analysts expect earnings to reach $741.9 million (and earnings per share of $2.05) by about September 2028, down from $768.9 million today.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 32.8x on those 2028 earnings, up from 21.0x today. This future PE is greater than the current PE for the US Machinery industry at 24.7x.
Analysts expect the number of shares outstanding to decline by 2.48% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 8.69%, as per the Simply Wall St company report.

Fortive Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

The spin-off of the Precision Technologies segment (now Ralliant) leaves Fortive more focused but also exposes it to higher concentration risk in its remaining segments, potentially reducing diversification and increasing earnings volatility in the face of segment-specific headwinds (impacts revenue and earnings stability).
Prolonged government fiscal tightening and constrained state/local spending, as highlighted by Gordian's weak year-end results, could lead to slower recovery and unpredictability in recurring public sector end-markets, affecting core revenue growth and organic acceleration objectives (impacts revenue and recurring growth).
Persistent U.S.-China tariff uncertainty and broader volatility in global trade policy remain acute headwinds, with the company citing significant quarterly revenue and gross margin drag from both direct tariff expenses and deferred customer demand; ongoing or escalated trade frictions could continue to pressure margins and limit revenue visibility (impacts gross margins and near-term/long-term revenue).
Ongoing reliance on bolt-on M&A, even with stricter financial scrutiny, introduces integration and execution risk, particularly after a period of management transition and organizational re-focus post-spin, which could dampen net margin improvement and jeopardize anticipated synergy realization (impacts net margins and future earnings quality).
The Advanced Healthcare Solutions (AHS) segment faces structural pressure from U.S. health care reimbursement policy changes and delayed hospital capital spending, with management indicating no near-term improvement expected; extended softness here risks eroding overall growth, especially as comps toughen and organic innovation may lag digital-first competitors (impacts segment revenue and operating margin trajectory).

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of $60.5 for Fortive based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $116.0, and the most bearish reporting a price target of just $50.0.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $4.5 billion, earnings will come to $741.9 million, and it would be trading on a PE ratio of 32.8x, assuming you use a discount rate of 8.7%.
Given the current share price of $47.71, the analyst price target of $60.5 is 21.1% higher. Despite analysts expecting the underlying buisness to decline, they seem to believe it's more valuable than what the market thinks.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

How well do narratives help inform your perspective?

Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

Recurring Software Trends Will Secure Resilience Amid Tariff Uncertainty