Back to top

Image: Bigstock

Zebra's (ZBRA) Solid Potential Aids, Lingering Risks Ail

Read MoreHide Full Article

Zebra Technologies Corporation (ZBRA - Free Report) stands to gain from its presence in the diverse end markets, allowing it to offset risks associated with a single market. In the quarters ahead, strong demand for Zebra’s task management and prescriptive analytics software solutions, intelligent automation solutions, enterprise mobile computing, and services and software across all regions is likely to benefit ZBRA. Also, Zebra’s focus on investment in growth initiatives and supply-chain optimization is likely to drive its performance.

Zebra intends to strengthen and expand its businesses through acquisitions. ZBRA’s acquisition of (October 2021) boosted its retail software portfolio that includes the likes of Workforce Connect and SmartCount solutions. Also, the buyout of Fetch Robotics, Inc. in August 2021 enabled it to offer a comprehensive line of advanced robotics solutions to customers. The Adaptive Vision acquisition in May 2021 added value to ZBRA’s fixed industrial scanning and machine vision solution offerings.

Zebra focuses on rewarding its shareholders through share repurchases. In the first quarter of 2022, ZBRA repurchased shares worth $305 million. ZBRA authorized a share repurchase program worth $1 billion in May 2022. It is left to repurchase shares worth $1.2 billion in aggregate, with the new buyback authorization. It is worth noting that ZBRA had authorized a repurchase program of up to $1 billion of its outstanding shares, back in July 2019. Exiting first-quarter 2022, ZBRA had $392 million worth of shares left for repurchase under its buyback plan.

Supply–chain disruption, freight costs, operating expenses and cost of sales woes pose a challenge. Zebra’s cost of sales and operating expense increased 14.9% and 11% each year over year in the first quarter of 2022. These adversities are expected to persist in the near term too.

ZBRA’s global operations expose it to certain environmental, geopolitical and political issues. Also, in the quarters ahead, Zebra remains vulnerable to foreign-currency translation risks. ZBRA’s overseas business might be depressed by a stronger U.S. dollar.

Zacks Investment Research
Image Source: Zacks Investment Research

In the past three months, this currently Zacks Rank #3 (Hold) stock has dropped 22.4% compared with the industry’s decline of 20.2%.

Zacks Rank & Stocks to Consider

Some better-ranked companies from the industrial products sector are discussed below.

Applied Industrial Technologies, Inc. (AIT - Free Report) presently sports a Zacks Rank #1. AIT delivered a trailing four-quarter earnings surprise of 25.4%, on average. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

AIT’s earnings estimates have increased 5.9% for fiscal 2022 (ending June 2022) in the past 60 days. Its shares have rallied 7% in the past three months.

Roper Technologies, Inc. (ROP - Free Report) presently has a Zacks Rank #2 (Buy). Its earnings surprise in the last four quarters was 2%, on average.

In the past 60 days, ROP’s earnings estimates have increased 1.1% for 2022. The stock has declined 6.5% in the past three months.

Ferguson plc (FERG - Free Report) is presently Zacks #2 Ranked. FERG’s earnings surprise in the last four quarters was 14.2%, on average.

In the past 60 days, the stock’s earnings estimates have increased 2.8% for fiscal 2022 (ending July 2022). The same has declined 23.4% in the past three months.