Technology Stocks

FLIR Systems, Inc. (NASDAQ:FLIR) Expects Higher Growth Ahead As Various Companies Commit To Integrate Its Products

The year 2018 ended with a series of significant developments for FLIR Systems, Inc. (NASDAQ:FLIR). Notably, Boeing selected FLIR’s Star SAFIRE 380-HDc EO/IR surveillance sensor for use in US Air Force’s UH-1N helicopter. In particular, the deal is part of a major program that seeks to replace USAF’s current fleet of UH-N1 helicopters.

Helicopter replacement program

The UH-N1 fleet of helicopters plays a significant role in the protection of America’s nuclear facilities. As such, they need the best-in-class sensors to perform their duties effectively. Interestingly, FLIR president and CEO Jim Cannon believe his company’s sensors are up to the task.

While commenting on the deal with Boeing, Cannon said, “Our airborne imaging solutions will ensure enhanced surveillance and threat detection for the US Strategic Command Mission, helping to keep our airmen and citizens safe.”

According to details of the deal, FLIR will provide sensors which Boeing will fit on the initial four MH-139 helicopters. In total, 84 helicopters require the new sensors which the firm will deliver. Interestingly, FLIR expects to rake in not less than $40 million from the contract.

In particular, the entire program targets the replacement of all the UH-N1 helicopters with new fleets of MH-139. Besides facilitating protection of nuclear intercontinental ballistic missile bases, the aircraft will help in the training of new air force pilots. Further, with the help of the FLIR-sourced sensors, the helicopters will facilitate airlift missions by providing operational support.

Too little too late

Meanwhile, FLIR announced a strategic partnership with DJI, a leading producer of civilian drones. In the deal, DJI will incorporate FLIR’s camera that supports microthermal imaging. In particular, the FLIR Lepton® cameras will help DJI to advance aerial imaging capabilities of its DJI Mavic 2 Enterprise Dual drone.

According to an official statement, the use of the cameras will “expand the close-range capabilities of commercial pilots, helping them to work better, safer and quicker with side-by-side thermal imaging and visible imagery.”

Notably, the partnership program aims to spur innovation in the thermal imaging sector. Further, due to the camera’s lightweight, high-performance nature, DJI will be able to improve the quality of the design of their drones. Interestingly, this is not the first instance the two firms are working together. In early 2018, the FLIR and DJI collaborated to deliver the DJI Zenmuse XT2 camera project.

Unfortunately, these vital developments in FLIR’s operations seem to have been too little too late to influence the share price. Notably, the company’s stock has performed dismally for the better part of the last quarter of 2018.

In early October, the stock broke the 50-day moving average support. Less than one month later, the stock breached the 200-day moving average support. Notably, the stock has traded below both moving averages since November.

Source: StockCharts.com

Investors overreacting

Seemingly, investors overreacted to the less than impressive Q3 2018 financial results. In the quarter, FLIR reported a 6.4% drop in revenue to $434.9 million. FLIR posted further losses in the GAAP gross profit where the value for Q3 2018 was $222.1 million compared to $222.9 million for Q3 2017.

However, there were positive figures in operating income as well as net earnings for the quarter. According to the earnings report, the increase in net earnings was down to a decrease in the firm’s effective tax rate.

As a result of the unimpressive financial performance for the third quarter, share activity dropped. Notably, the RSI indicator for the stock shows a bearish trend that has persisted since November. Further, market activity for the stock was dominated by the sellers who wanted to get the stock off their portfolio.

Nonetheless, the stock is likely to bounce back in 2019 due to the critical developments reported in December 2018.

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