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Zebra (ZBRA) Q3 Earnings & Revenues Beat Estimates, Up Y/Y

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Zebra Technologies Corporation (ZBRA - Free Report) reported solid third-quarter 2021 results, with earnings and sales surpassing estimates by 14.3% and 3%, respectively.

The company’s adjusted earnings per share in the reported quarter came in at $4.55, outpacing the Zacks Consensus Estimate of $3.98. The bottom line also increased 39.1% on a year-over-year basis.

Revenues & Segmental Performance

In the third quarter, Zebra generated net sales of $1,436 million, reflecting a year-over-year increase of 26.9%. The improvement was driven by a 23.2% increase in organic sales, a 1.3% contribution from acquisitions, and a 2.4% gain from movements in foreign currencies. The top line surpassed the Zacks Consensus Estimate of $1,395 million.

The company reports revenues under the segments discussed below:

Revenues from the Asset Intelligence & Tracking segment were $386 million, up 13.9% year over year. The increase was driven by a 12.1% growth in organic sales and a 1.8% gain from movements in foreign currencies.

The Enterprise Visibility & Mobility segment’s revenues were $1,050 million, up 32.1% year over year. The results benefited from 27.9% growth in organic sales, 1.6% benefits from acquisitions, and a 2.6% gain from movements in foreign currencies.

Margin Profile

In the third quarter, Zebra’s cost of sales totaled $790 million, reflecting a rise of 23.6% from the year-ago quarter. Total operating expenses in the quarter were $409 million, reflecting an increase of 19.2%.

Net income in the reported quarter increased 71.6% year over year to $199 million while adjusted margin expanded 370 basis points to 13.9%.

Balance Sheet and Cash Flow

Exiting the third quarter, the company had cash and cash equivalents of $307 million, down 3.5% from $318 million recorded at the end of the prior quarter. Long-term debt was down 0.4% sequentially to $940 million.

In the first nine months of 2021, it generated net cash of $836 million from operating activities compared with $531 million in the year-ago period. In the same time frame, its net debt repayments totaled $256 million and interest payments were $25 million. Capital expenditure was $38 million. Free cash flow was $798 million, reflecting an increase of 65.6% from the year-ago period.

In the first nine months of 2021, the company repurchased shares worth $25 million compared with $200 million in the year-ago period.

Outlook

For the fourth quarter of 2021, Zebra estimates adjusted net sales to grow 8-12% on a year-over-year basis. Adjusted earnings are projected to lie in the range of $4.20 to $4.50. Adjusted effective tax rate is likely to be about 18%.

For 2021, the company expects free cash flow to be a minimum of $950 million.

Zacks Rank & Stocks to Consider

The company currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks from the Zacks Industrial Products sector are Alcoa Corporation (AA - Free Report) , AZZ Inc. (AZZ - Free Report) , and Franklin Electric Co., Inc. (FELE - Free Report) . While Alcoa and AZZ currently sport a Zacks Rank #1 (Strong Buy), Franklin Electric carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Alcoa delivered an earnings surprise of 39.77%, on average, in the trailing four quarters.

AZZ delivered an earnings surprise of 25.47%, on average, in the trailing four quarters.

Franklin Electric delivered an earnings surprise of 16.27%, on average, in the trailing four quarters.