A month has gone by since the last earnings report for Zebra Technologies (
ZBRA Quick Quote ZBRA - Free Report) . Shares have lost about 7.6% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Zebra due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Zebra Q2 Earnings & Revenues Surpass Estimates
Zebra Technologies reported second-quarter 2022 adjusted earnings (excluding $6.09 from non-recurring items) of $4.22 per share, outperforming the Zacks Consensus Estimate of $3.93. The bottom-line increased year over year.
Total revenues of $1,468 million surpassed the Zacks Consensus Estimate of $1,446.7 million. The top line increased 6.6% year over year. Consolidated organic net sales increased 6.9% year over year. Acquisitions contributed 1.7% to the top line, while foreign-currency translation had an adverse impact of 2% on sales. Segmental Performance
Revenues from the Asset Intelligence & Tracking (AIT) segment were $446 million, up 7.7% year over year. Organic net sales increased 9.7% in the AIT segment. Foreign-currency translation hurt segmental revenues by 2%.
The Enterprise Visibility & Mobility segment’s revenues were $1,022 million, up 5.8% year over year. The results benefited from 5.6% growth in organic sales. Acquisitions contributed 2% to the top line, while foreign-currency translations hurt revenues by 1.8%. Margin Profile
In the second quarter, Zebra Technologies’ cost of sales totaled $794 million, up 10.4% year over year. Total operating expenses were $819 million, up nearly 100% year over year.
ZBRA incurred a net loss of $98 million for the second quarter compared with net income of $219 million in the year-ago period. Balance Sheet and Cash Flow
Exiting the second quarter, Zebra Technologies had cash and cash equivalents of $98 million compared with $332 million at the end of December 2021. Long-term debt was $2,017 million compared with $922 million at the end of December 2021.
In the first six months of 2022, Zebra Technologies generated net cash of $154 million compared with $539 million at the end of the year-ago period. In the first half of 2022, the company incurred capital expenditures of $31 million, while free cash flow was $123 million. During the same period, the company repurchased shares worth $605 million. Q3 Outlook
For the third quarter of 2022, Zebra Technologies adjusted net sales to increase 2-4% year over year. The guidance includes an approximate 2-point positive impact from its acquired businesses and a 3-point negative impact from foreign-currency translation. Adjusted EBITDA margin is expected to be approximately 22% in the third quarter. Effective tax rate is estimated to be approximately 18%. Adjusted earnings per share are predicted to be in the range of $4.35-$4.65. The Zacks Consensus Estimate for the same is pegged at $5.04.
Zebra Technologies now expects adjusted net sales to increase 4-6% year over year in 2022 compared with a rise of 3-7% estimated earlier. The guidance includes an approximate 150 basis point positive impact from acquired businesses and an approximate 225 basis point negative impact from foreign-currency headwinds.
Adjusted EBITDA margin is expected to be approximately 22% for the full year compared with 22-23% anticipated earlier. The reduced guidance is due to foreign-currency woes. ZBRA now predicts free cash flow to be at least $650 million (including an anticipated $150 million of settlement and related payments) compared with the previous expectation of at least $800 million. How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
The consensus estimate has shifted -11.8% due to these changes.
Currently, Zebra has an average Growth Score of C, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Zebra has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.