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Zebra (ZBRA) Displays Solid Prospects, Headwinds Remain

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Zebra Technologies Corporation (ZBRA - Free Report) has been benefiting from strong demand for printing and supplies, enterprise mobile computing, intelligent automation solutions, as well as services and software across all regions. The company’s investment in growth initiatives, along with a focus on supply-chain optimization and cost management actions, is likely to drive its performance. For 2021, it anticipates its net sales to grow more than 25% year over year, higher than 23-25% predicted earlier.

The company’s acquisition of antuit.ai (October 2021) is expected to enhance the planning and demand forecasting module for its retail software portfolio. Its Fetch Robotics, Inc. buyout (August 2021) will likely strengthen its capability to offer a comprehensive line of advanced robotics solutions to customers. Its acquisition of Reflexis Systems, Inc. (September 2020) has also strengthened its software offerings across retail and other key markets. In the second and third quarters of 2021, buyouts contributed 1.6% and 1.3% to its net sales, respectively.

Its ability to generate healthy cash flow adds to its strength. In the first nine months of 2021, it generated free cash flow of $798 million, up 65.6% year over year. For 2021, it expects free cash flow to be at least $950 million. In the first nine months of 2021, it used $25 million for share buybacks.

However, Zebra has been dealing with high cost of sales and operating expenses. In the third quarter, its cost of sales recorded an increase of 23.6% on a year-over-year basis, while operating expenses jumped 19.2%. Challenges related to the supply chain and higher freight costs might affect its near-term performance.

Risks related to the company’s international exposure might also affect its performance.

Zacks Investment ResearchImage Source: Zacks Investment Research

In the past three months, this Zacks Rank #3 (Hold) stock has returned 0.8% compared with the industry’s growth of 0.1%.

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Some better-ranked companies from the Zacks Industrial Products sector are discussed below.

Helios Technologies, Inc. (HLIO - Free Report) presently carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here. Its earnings surprise in the last four quarters was 37.54%, on average.

In the past 30 days, Helios’ earnings estimates have increased 7.9% for 2021 and 9.8% for 2022. Its shares have gained 17.5% in the past three months.

Applied Industrial Technologies, Inc. (AIT - Free Report) presently carries a Zacks Rank #2. Its earnings surprise in the last four quarters was 26.71%, on average.

Applied Industrial’s earnings estimates have been stable for fiscal 2022 (ending June 2022) and fiscal 2023 (ending June 2023) in the past 30 days. Its shares have gained 16.7% in the past three months.

Welbilt, Inc. (WBT - Free Report) presently carries a Zacks Rank #2. Its average earnings surprise in the last four quarters was 172.50%.

Welbilt’s estimates for 2021 have been stable for 2021 and 2022 in the past 30 days. Its shares have gained 0.9% in the past three months.