In a familiar refrain, multi-industry industrial company Roper Technologies (NYSE:ROP) reported record results, beat its own estimates, and raised guidance for the full year.

The company's asset-light business model continues to deliver for investors, and, in particular, margin and cash flow continues to impress. There's a lot to like about the company's second quarter, so let's take a closer look.

A handful of $100 bills falling through the air.

Roper Technologies is a company that knows how to generate cash. Image source: Getty Images.

Roper Technologies second-quarter earnings: The raw numbers

Starting with the headline numbers from the quarter:

  • Revenue of $1.29 billion represents an increase of 14% compared to the same period last year.
  • Adjusted diluted earnings per share of $2.89 represent a 29% increase over last year, and came in ahead of the guidance range of $2.65 to $2.71.

Revenue growth was strong in the quarter, earnings came in significantly ahead of estimates, and it led management to increase full-year earnings guidance for the third straight quarter.

Full-Year Guidance

At Q4 2017

At Q1 2018

At Q2 2018

Adjusted diluted EPS

$10.88-$11.20

$11.08-$11.32

$11.40-$11.56

Data source: Roper Technologies presentations.

What happened in the quarter

It's a good idea to look at Roper's earnings by segment and its organic growth because the company has a habit of acquiring businesses in relatively diverse industries -- a strategy that has led to the company doubling the stock's value in the last five years

The interesting thing about Roper's segmental performance is that the two smallest segments, industrial technology and energy systems and controls, suffered the most during the U.S. industrial recession of 2015-2016, but now they are bouncing back strongly. The reason for this is the exposure to oil and gas capital spending in both segments -- spending was hit hard by the slump in energy prices.

Segment

Organic Revenue Growth

Revenue Growth

Operating Profit

Operating Profit Growth

RF technology and software

7%

13%

$159 million

19%

Medical and scientific imaging

6%

7%

$126 million

4%

Industrial technology

18%

20%

$74 million

27%

Energy systems and controls

12%

16%

$42 million

28%

Data source: Roper Technologies presentations.

Cash flow as strong as ever

CEO Brian Jellison takes pride in the company's asset-light business model and how it allows the company to generate prodigious amounts of cash from which it can reduce debt or make earnings-enhancing acquisitions. Indeed, cash flow generation was strong again with first-half free cash flow coming in at $520 million, representing nearly 21% of revenue in the period.

Moreover, management has been making great strides in reducing the amount of cash it needs to tie up in running the business. As you can see below, Roper's working capital is now a net negative, meaning that it contributes to cash generation rather than detracting from it -- highly unusual for an industrial company.

Net working capital as a % of annualized revenue

Data source: Roper Technologies presentations. Chart by author.

The outlook for the second half

Roper's segmental outlook for the rest of the year suggests the company will end the year on a strong note. RF technology and software (a segment that can have lumpy revenue due to the timing of toll road projects) is expected to grow revenue at a 4% to 6% rate in the second half.

Meanwhile, medical and scientific imaging, the other major segment, is expected to grow organic revenue in high single digits in the third quarter before slowing slightly to mid-single digits in the fourth quarter.

The two smaller segments, industrial technology and energy systems and controls, are both expected to grow organic revenue in double digits in the third quarter and then mid-single digits in the fourth.

Looking ahead

The company has built its reputation on the back of earnings-enhancing acquisitions and the recent $1.1 billion acquisition of PowerPlan (software and solutions for asset-centric companies) is the next step in the process.

Investors will be hoping that Roper can successfully integrate PowerPlan while continuing the overall company's track record. Shareholders have gotten used to excellent results from Roper and will be hoping for a continuation of the trend.

Lee Samaha has no position in any of the stocks mentioned. The Motley Fool recommends Roper Technologies. The Motley Fool has a disclosure policy.