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Motorola Solutions Inc. (MSI - Analyst Report) is slated to release its second quarter 2012 results on Wednesday, July 25, before the opening bell. The current Zacks Consensus Estimate for the quarter is pegged at 62 cents, representing an annualized growth of 9.12%.

With respect to earnings surprises, Motorola Solutions has outperformed the Zacks Consensus Estimate in each of the past four quarters. The average earnings surprise is a positive 11.26%, implying that the company has outdone the Zacks Consensus Estimate by the same magnitude over the last four quarters.

First Quarter Recap

Quarterly GAAP net income from continuing operation was $159 million or 50 cents per share compared with $367 million or $1.07 per share in the prior-year quarter. Earnings per share of 50 cents in the first quarter of 2012 were well ahead of the Zacks Consensus Estimate of 47 cents.

Quarterly total revenue of $1,956 million was up 6.7% year over year, and marginally above the Zacks Consensus Estimate of $1,918 million. Quarterly gross margin was 49.7% compared with 50.4% in the prior-year quarter. Quarterly operating margin was 11.9% versus 9.2% in the prior-year quarter.

Agreement of Estimate Revisions

In the last 30 days, none of the five analysts covering the stock increased or decreased the estimate for the second quarter and third quarter of 2012. For fiscal 2012 and 2013, none of the 6 analysts covering the stock raised or slashed the EPS estimate.

Magnitude of Estimate Revisions

Due to lack of any estimate revisions, the Zacks Consensus Estimates for the ongoing quarter and the next quarter of fiscal 2012 has remained stable over the last 30 days, at 62 cents and 69 cents, respectively.

For fiscal 2012 and 2013, the current Zacks Consensus Estimate was flat with the earlier estimate of $2.76 and $3.31, respectively.

Earnings Surprises

The second and third quarter of 2012 represent a 0.00% and 0.00% upside potential (essentially a proxy for future earnings surprises), respectively. Similarly, fiscal 2012 and 2013 reflect a 0.00% and 0.00% upside potentials, respectively.

Our Take

Huge market share for public safety products and a massive $6 billion of order backlog coupled with a share buyback program of $2 billion through the end of 2012 will certainly boost the top and bottom line of Motorola Solutions.

However, the company is heavily dependent on Government expenditures for its revenue. Approximately 65% of total sales of Motorola Solutions are from government agencies. So we believe that slowdown in the government expenditures due to budgetary pressures may significantly jeopardize the company’s overall financials. Moreover, Sprint Nextel Corp. (S - Analyst Report) plans to gradually phase-out of iDEN network, which is believed to be a major setback for the company going forward. Thus, we maintain our long-term Neutral recommendation on Motorola Solutions Inc.

Currently, Motorola Solutions Inc. has a Zacks #4 Rank, implying a short-term Sell rating.

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