The stock needs about $7.10 of fiscal 2027 adjusted earnings at 23 times. I model $7.20, so twelve months look like a market return, not a rerating.
Key points
- $163.50 requires about $7.10 of fiscal 2027 adjusted earnings at 23 times.
- $6.55 is company fiscal 2026 adjusted EPS guidance after the August raise.
- $7.20 is my fiscal 2027 estimate; 22.5 times that is $162.
The call
The shares sit at 25 times this year’s $6.55 of adjusted earnings and need $7.10 next year at 23 times to stay here. Fiscal 2026 free cash of $3.6 billion is a 4 percent yield on a $91 billion equity value.
I believe $7.20 is reachable if power, semiconductor testing and software annual contract value keep growing while China chemicals stay weak. That is a $162 stock, a market-like return from $163.50, not a rerating.
Adjusted EPS: reported path vs what $163.50 needsCompany adjusted EPS from earnings releases; my FY26E $6.55 and FY27E $7.20. Price at 23 times needs about $7.10.
Valuation
| Item | Figure |
|---|
| Fiscal 2026 adjusted EPS (company) | $6.55 |
| My fiscal 2027 adjusted EPS | $7.20 |
| Multiple on 2027 earnings | 22.5 times |
| 12-month target | $162 |
| Fiscal 2026 free cash | $3.6 billion |
Twenty-two to 23 times is a fair industrial-software mix once growth is mid-single-digit. Being right by 50 cents of earnings barely moves the stock; being wrong on China or Middle East shipments cuts more.
Revenue by fiscal year ($ billions)Company filings through FY25; my estimates for FY26E and FY27E. August 2026 guidance ~5% reported growth.
Risks
- Software contract renewals stay lumpy and cut Software & Systems margin again.
- Middle East shipments stay constrained near the $100 million full-year hit.
- China chemicals and Europe discrete stay soft longer than the 3.5 percent underlying sales plan.
What would change my mind
Fiscal 2027 guidance well above $7.50 of adjusted earnings with orders still growing would justify a higher multiple.