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We have maintained our Neutral recommendation on Motorola Solutions Inc. (MSI - Analyst Report), as the top line beat the Zacks Consensus Estimate but the bottom line fell short in the recently concluded quarter.

Why Kept at Neutral?

The company is a market leader in the lucrative U.S. public safety market and will be able to maintain its current top-line growth in the future primarily due to the critical nature of the public safety network in the U.S. The company has won several lucrative contracts from various municipalities in the U.S. and is also expanding in Australia, the Middle East and Latin America, which will further drive the company’s revenues going forward.

Motorola Solutions also entered into an agreement with Verizon Wireless (VZ - Analyst Report) to install a standard-based public safety broadband network for mission-critical operations leveraging on the nationwide LTE network of Verizon. This solution will offer public safety agencies real-time management and control, enhanced nationwide roaming, while sharing the existing mobile broadband sites.

Currently, the most significant catalyst for Motorola Solutions is the proposed installation of 4G LTE networks for public safety in the U.S.Several industry researchers have estimated that the market size of public safety may reach $6.5 billion in 2014.

Meanwhile, the Enterprise segment remains a near-term concern due to macroeconomic uncertainties in Europe and unfavorable foreign exchange movement between the U.S. dollar and the Euro. Slowdown in the government expenditures due to budgetary pressures, particularly at the state and local levels, may significantly jeopardize the company’s overall financials as the company depends majorly on the government expenditures for revenues.

Moreover, Sprint’s decision to phase out iDEN network is a setback for Motorola Solutions, which is expected to impact its top line in the current year.

Currently, Motorola Solutions Inc. has a Zacks Rank #4 (Sell).

Other Stocks Outlook in Related Industries

Other stocks in this sector like Honeywell International Inc. (HON - Analyst Report), Ericsson (ERIC - Analyst Report) and General Dynamics Corp. (GD - Analyst Report) have all outpaced the bottom lines of the Zacks Consensus Estimate in the recently concluded quarter.

Currently, Honeywell has a Zacks Rank #2 (Buy) while Ericsson and General Dynamics carry a Zacks Rank #3 (Hold).

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