Fortive (FTV): The Undervalued AI Infrastructure Play Set to Soar Post-Spinoff

The stock market often misses the forest for the trees. Right now, Fortive (FTV) is one of those hidden gems that's being overlooked, even as it's positioned to power two of the hottest trends in tech and energy: artificial intelligence (AI) and industrial automation. After spinning off its Precision Technologies segment into Ralliant (RLLT), Fortive is leaner, meaner, and laser-focused on its high-margin, recurring revenue streams. This is a company that's primed for a valuation renaissance—and I'm telling you: this is a buy.

The Spinoff Unlocks Hidden Value

The separation of Ralliant isn't just a balance sheet cleanup—it's a masterstroke. By isolating its legacy precision manufacturing business, Fortive has freed itself to focus on its Intelligent Operating Solutions and Advanced Healthcare Solutions segments. These divisions are the real growth engines here, fueled by recurring revenue (50% of total) that's growing at 6% annually. That's not just “steady”—it's a moat in a world where volatility reigns.

But here's the kicker: Fortive's financial health is bulletproof. The spinoff generated $1.15 billion in cash for Fortive, which it's using to slash debt and buy back shares. While the company hasn't declared itself “debt-free” outright, the $550 million allocated to buybacks and the $1.15 billion infusion suggest it's on a path to deleverage aggressively. Combine this with a 60% gross profit margin and robust free cash flow, and you've got a company that's not just surviving—it's thriving.

AI + Energy = The Perfect Storm for Fortive

Let's talk about the real moneymaker: AI's hunger for energy infrastructure. AI requires massive compute power, which demands advanced sensors, automation tools, and safety systems—all of which Fortive's Intelligent Operating Solutions provide. Its brands, like Fluke and Keithley, are the unsung heroes of industrial automation. As factories, data centers, and energy grids ramp up AI adoption, these tools become indispensable.

Meanwhile, Fortive's healthcare division is a stealth growth driver. Its software and diagnostic tools, embedded with AI, are already boosting margins. The company's integration of AI into its Fortive Business System (FBS) isn't just a buzzword—it's a 6% annual revenue accelerator. This isn't pie-in-the-sky stuff; it's already baked into the numbers.

Near-Term Headwinds Are Temporary—Stay the Course

Critics will point to tariff pressures and sluggish Q2 guidance (flat-to-down revenue). But here's why those are red herrings:
1. Tariffs are a demand-side issue, not a structural one. As companies adjust to new pricing, Fortive's recurring revenue model will stabilize results.
2. Q2's softness is baked into the stock's price. With shares trading at just 13x forward earnings (versus peers like Danaher (DHR) at 18x), the market's already priced in the bad news.

The Catalysts That Will Ignite FTV

• Q2 Earnings Call (Late July 遑 2025): Management will update guidance excluding Ralliant, giving a clearer picture of Fortive's standalone growth. A beat here could trigger a rerating.
• Buybacks and Dividends: The $550 million buyback program and growing dividend (Fortive has raised it every year since 2016) will shrink shares outstanding and boost EPS.
• AI/Healthcare Synergy: As AI adoption accelerates, investors will finally realize that Fortive isn't just a “hardware company”—it's a software-enabled infrastructure giant.

Why 100%+ Returns Are in Play

At current prices (~$50/share), Fortive is trading at a 20% discount to its peers based on growth prospects. If its recurring revenue hits 6% growth annually and margins expand further, a $100+ price target isn't a stretch. Add in the catalysts above, and this stock could double in 12–18 months.

Final Verdict: Buy Fortive Now—Before the Crowd Catches On

Fortive isn't just an undervalued stock—it's a strategic bet on the future of AI and industrial automation. The spinoff has cleared the decks for growth, and the near-term noise won't drown out its long-term potential.

Action to Take: Buy Fortive (FTV) now at $50/share, with a $100 price target. Set a stop-loss at $40 to protect against macro volatility.

The next 12 months will be transformative for FTV. Don't miss the train.