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Motorola (MSI) Beats Q4 Earnings Estimates on Record Revenues
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Motorola Solutions, Inc. (MSI - Free Report) reported strong fourth-quarter 2022 results, driven by the diligent execution of operational plans and healthy growth dynamics backed by solid order trends. Both adjusted earnings and revenues surpassed the respective Zacks Consensus Estimate. In addition, Motorola achieved record fourth-quarter sales and a quarter-ending backlog despite supply chain headwinds, which further exemplified the strength of its portfolio. The company expects this growth momentum to continue in the impending quarters.
Net Earnings
On a GAAP basis, net earnings in fourth-quarter 2022 were $589 million or $3.43 per share compared with $401 million or $2.30 per share in the year-earlier quarter. The year-over-year improvement despite the higher cost of sales was primarily attributable to top-line growth.
Excluding non-recurring items, non-GAAP earnings in the quarter were record high at $618 million or $3.60 per share compared with $497 million or $2.85 in the year-ago quarter. The bottom line beat the Zacks Consensus Estimate by 17 cents.
In full-year 2022, GAAP earnings improved to $1,363 million or $7.93 per share from $1,245 million or $7.17 per share in 2021, while non-GAAP earnings were up to $1,780 million or $10.36 per share from $1,589 million or $9.15 per share.
Motorola Solutions, Inc. Price, Consensus and EPS Surprise
Quarterly net sales were record high at $2,706 million, up 16.6% year over year, with solid sales in both segments due to growth in North America driven by the strength of its business model and the value of its mission-critical integrated ecosystem. The company witnessed strong demand for video security, command center software and LMR (land mobile radio) services. The top line beat the consensus estimate of $2,535 million. Net sales in 2022 were $9,112 million, up 11.5% year over year.
Region-wise, quarterly revenues were up 17.5% in North America to $1,615 million due to growth in LMR, command center soft and video security products. International revenues were up 14.6% to $808 million, as growth in video security products, LMR and command center software was partially offset by adverse foreign currency impact. Acquisitions contributed $39 million to revenues, while foreign exchange headwinds were $87 million.
Segmental Performance
Net sales from Products and Systems Integration increased to $1,810 million from $1,495 million in the year-ago quarter, driven by higher demand for LMR and video security solutions. The segment’s backlog was up $894 million to $4.9 billion, primarily due to high LMR and video demand in North America and the International markets.
Net sales from Software and Services were up 8.6% to $896 million, with solid performance across command center software, LMR and video security services. The segment’s backlog decreased $106 million to $9.4 billion, primarily due to adverse foreign currency impact and its exit from Emergency Services Network business.
Other Quarterly Details
GAAP operating earnings increased to $692 million from $549 million in the prior-year quarter, while non-GAAP operating earnings were up to $822 million from $670 million a year ago. The company ended the quarter with a record fourth-quarter backlog of $14.3 billion, up $788 million year over year.
Overall GAAP operating margin was 25.6%, up from 23.7%, while non-GAAP operating margin was 30.4% compared with 28.9% in the year-ago quarter. The increase in GAAP operating margin despite higher operating expenses, owing to inflated direct material costs and acquisitions, was due to higher sales.
Non-GAAP operating earnings for Products and Systems Integration were up 36% to $514 million for a margin of 28.4%. Non-GAAP operating earnings for Software and Services were $308 million, up 5.5% year over year, for a non-GAAP operating margin of 34.4%.
Cash Flow and Liquidity
Motorola generated $1,823 million of cash from operating activities in 2022 compared with $1,837 million a year ago. Free cash flow in 2022 was $1,567 million, down from $1,594 million in 2021. The company repurchased $87 million worth of stock during the fourth quarter. As of Dec 31, 2022, MSI had $1,325 million of cash and cash equivalents with $6,013 million of long-term debt compared with respective tallies of $1,874 million and $5,688 million in the prior-year period.
Guidance
With solid quarterly results and robust demand patterns, the company offered bullish guidance for 2023. Non-GAAP earnings for 2023 are currently expected in the $11.10-$11.22 per share range on year-over-year revenues of $9.65 billion to $9.7 billion, with a rise in both segments on higher demand.
For first-quarter 2023, non-GAAP earnings are expected in the $2.02-$2.07 per share range on year-over-year revenue improvement of 12-13% due to healthy demand trends.
Moving Forward
Motorola is poised to gain from disciplined capital deployment and a strong balance sheet position. The company expects to witness strong demand across LMR products, the video security portfolio, services and software while benefiting from a solid foundation.
Arista Networks, Inc. (ANET - Free Report) , carrying a Zacks Rank #2, is likely to benefit from the strong momentum and diversification across its top verticals and product lines. The company has a software-driven, data-centric approach to help customers build their cloud architecture and enhance their cloud experience. Arista has a long-term earnings growth expectation of 17.5% and delivered an earnings surprise of 12.7%, on average, in the trailing four quarters.
It holds a leadership position in 100-gigabit Ethernet switching share in port for the high-speed datacenter segment. Arista is increasingly gaining market traction in 200- and 400-gig high-performance switching products and remains well-positioned for healthy growth in data-driven cloud networking business with proactive platforms and predictive operations.
Viavi Solutions Inc. (VIAV - Free Report) , carrying a Zacks Rank #2, is a key pick. Headquartered in Scottsdale, AZ, Viavi is a leading provider of network test, monitoring and service enablement solutions to diverse sectors across the globe. The product portfolio of the company offers end-to-end network visibility and analytics that help build, test, certify, maintain, and optimize complex physical and virtual networks.
Viavi also offers high-performance thin film optical coatings for light-management solutions used in anti-counterfeiting, 3D sensing, electronics, automotive, defense and instrumentation markets. It delivered an earnings surprise of 9.1%, on average, in the trailing four quarters.
Comtech Telecommunications Corp. (CMTL - Free Report) , carrying a Zacks Rank #2, is another key pick. Headquartered in Melville, NY, the company is a leading global provider of next-generation 911 emergency systems and secure wireless communications technologies to commercial and government customers.
Comtech’s key satellite earth station modems incorporate forward error correction and bandwidth compression technologies, which enable its customers to optimize their satellite networks by either reducing their satellite transponder lease costs or increasing data throughput. It holds leadership positions in the market for high-throughput modems used in cellular backhaul.
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Motorola (MSI) Beats Q4 Earnings Estimates on Record Revenues
Motorola Solutions, Inc. (MSI - Free Report) reported strong fourth-quarter 2022 results, driven by the diligent execution of operational plans and healthy growth dynamics backed by solid order trends. Both adjusted earnings and revenues surpassed the respective Zacks Consensus Estimate. In addition, Motorola achieved record fourth-quarter sales and a quarter-ending backlog despite supply chain headwinds, which further exemplified the strength of its portfolio. The company expects this growth momentum to continue in the impending quarters.
Net Earnings
On a GAAP basis, net earnings in fourth-quarter 2022 were $589 million or $3.43 per share compared with $401 million or $2.30 per share in the year-earlier quarter. The year-over-year improvement despite the higher cost of sales was primarily attributable to top-line growth.
Excluding non-recurring items, non-GAAP earnings in the quarter were record high at $618 million or $3.60 per share compared with $497 million or $2.85 in the year-ago quarter. The bottom line beat the Zacks Consensus Estimate by 17 cents.
In full-year 2022, GAAP earnings improved to $1,363 million or $7.93 per share from $1,245 million or $7.17 per share in 2021, while non-GAAP earnings were up to $1,780 million or $10.36 per share from $1,589 million or $9.15 per share.
Motorola Solutions, Inc. Price, Consensus and EPS Surprise
Motorola Solutions, Inc. price-consensus-eps-surprise-chart | Motorola Solutions, Inc. Quote
Revenues
Quarterly net sales were record high at $2,706 million, up 16.6% year over year, with solid sales in both segments due to growth in North America driven by the strength of its business model and the value of its mission-critical integrated ecosystem. The company witnessed strong demand for video security, command center software and LMR (land mobile radio) services. The top line beat the consensus estimate of $2,535 million. Net sales in 2022 were $9,112 million, up 11.5% year over year.
Region-wise, quarterly revenues were up 17.5% in North America to $1,615 million due to growth in LMR, command center soft and video security products. International revenues were up 14.6% to $808 million, as growth in video security products, LMR and command center software was partially offset by adverse foreign currency impact. Acquisitions contributed $39 million to revenues, while foreign exchange headwinds were $87 million.
Segmental Performance
Net sales from Products and Systems Integration increased to $1,810 million from $1,495 million in the year-ago quarter, driven by higher demand for LMR and video security solutions. The segment’s backlog was up $894 million to $4.9 billion, primarily due to high LMR and video demand in North America and the International markets.
Net sales from Software and Services were up 8.6% to $896 million, with solid performance across command center software, LMR and video security services. The segment’s backlog decreased $106 million to $9.4 billion, primarily due to adverse foreign currency impact and its exit from Emergency Services Network business.
Other Quarterly Details
GAAP operating earnings increased to $692 million from $549 million in the prior-year quarter, while non-GAAP operating earnings were up to $822 million from $670 million a year ago. The company ended the quarter with a record fourth-quarter backlog of $14.3 billion, up $788 million year over year.
Overall GAAP operating margin was 25.6%, up from 23.7%, while non-GAAP operating margin was 30.4% compared with 28.9% in the year-ago quarter. The increase in GAAP operating margin despite higher operating expenses, owing to inflated direct material costs and acquisitions, was due to higher sales.
Non-GAAP operating earnings for Products and Systems Integration were up 36% to $514 million for a margin of 28.4%. Non-GAAP operating earnings for Software and Services were $308 million, up 5.5% year over year, for a non-GAAP operating margin of 34.4%.
Cash Flow and Liquidity
Motorola generated $1,823 million of cash from operating activities in 2022 compared with $1,837 million a year ago. Free cash flow in 2022 was $1,567 million, down from $1,594 million in 2021. The company repurchased $87 million worth of stock during the fourth quarter. As of Dec 31, 2022, MSI had $1,325 million of cash and cash equivalents with $6,013 million of long-term debt compared with respective tallies of $1,874 million and $5,688 million in the prior-year period.
Guidance
With solid quarterly results and robust demand patterns, the company offered bullish guidance for 2023. Non-GAAP earnings for 2023 are currently expected in the $11.10-$11.22 per share range on year-over-year revenues of $9.65 billion to $9.7 billion, with a rise in both segments on higher demand.
For first-quarter 2023, non-GAAP earnings are expected in the $2.02-$2.07 per share range on year-over-year revenue improvement of 12-13% due to healthy demand trends.
Moving Forward
Motorola is poised to gain from disciplined capital deployment and a strong balance sheet position. The company expects to witness strong demand across LMR products, the video security portfolio, services and software while benefiting from a solid foundation.
Motorola currently has a Zacks Rank #2 (Buy).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Other Key Picks
Arista Networks, Inc. (ANET - Free Report) , carrying a Zacks Rank #2, is likely to benefit from the strong momentum and diversification across its top verticals and product lines. The company has a software-driven, data-centric approach to help customers build their cloud architecture and enhance their cloud experience. Arista has a long-term earnings growth expectation of 17.5% and delivered an earnings surprise of 12.7%, on average, in the trailing four quarters.
It holds a leadership position in 100-gigabit Ethernet switching share in port for the high-speed datacenter segment. Arista is increasingly gaining market traction in 200- and 400-gig high-performance switching products and remains well-positioned for healthy growth in data-driven cloud networking business with proactive platforms and predictive operations.
Viavi Solutions Inc. (VIAV - Free Report) , carrying a Zacks Rank #2, is a key pick. Headquartered in Scottsdale, AZ, Viavi is a leading provider of network test, monitoring and service enablement solutions to diverse sectors across the globe. The product portfolio of the company offers end-to-end network visibility and analytics that help build, test, certify, maintain, and optimize complex physical and virtual networks.
Viavi also offers high-performance thin film optical coatings for light-management solutions used in anti-counterfeiting, 3D sensing, electronics, automotive, defense and instrumentation markets. It delivered an earnings surprise of 9.1%, on average, in the trailing four quarters.
Comtech Telecommunications Corp. (CMTL - Free Report) , carrying a Zacks Rank #2, is another key pick. Headquartered in Melville, NY, the company is a leading global provider of next-generation 911 emergency systems and secure wireless communications technologies to commercial and government customers.
Comtech’s key satellite earth station modems incorporate forward error correction and bandwidth compression technologies, which enable its customers to optimize their satellite networks by either reducing their satellite transponder lease costs or increasing data throughput. It holds leadership positions in the market for high-throughput modems used in cellular backhaul.