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Motorola (MSI) Q1 Earnings Beat on Record Revenues, View Up
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Motorola Solutions, Inc. (MSI - Free Report) reported strong first-quarter 2023 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 first-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 the first quarter were $278 million or $1.61 per share compared with $267 million or $1.54 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 $384 million or $2.22 per share compared with $294 million or $1.70 in the year-ago quarter. The bottom line beat the Zacks Consensus Estimate by 16 cents.
Motorola Solutions, Inc. Price, Consensus and EPS Surprise
Quarterly net sales were record high at $2,171 million, up 14.7% 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 $2,125 million.
Region-wise, quarterly revenues were up 14.3% in North America to $1,492 million due to growth in LMR, command center soft and video security products. International revenues were up 15.7% to $679 million, as growth in video security products, LMR and command center software was partially offset by adverse foreign currency impact. Acquisitions contributed $42 million to revenues, while foreign exchange headwinds were $45 million.
Segmental Performance
Net sales from Products and Systems Integration increased to $1,303 million from $1,103 million in the year-ago quarter, driven by higher demand for LMR and video security solutions. The segment’s backlog was up $601 million to $4.7 billion, primarily due to high LMR demand in North America and the International markets.
Net sales from Software and Services were up 10% to $868 million, with solid performance across command center software, LMR and video security services. The segment’s backlog increased $22 million to $9.4 billion, primarily due to higher multi-year software and services contracts in North America, partially offset by revenue recognition for the Airwave contract, unfavorable currency rates and a reduction related to the exit from the ESN contract.
Other Quarterly Details
GAAP operating earnings increased to $399 million from $239 million in the prior-year quarter, while non-GAAP operating earnings were up to $532 million from $374 million a year ago. The company ended the quarter with a record first-quarter backlog of $14.1 billion, up $623 million year over year.
Overall GAAP operating margin was 18.4%, up from 12.6%, while non-GAAP operating margin was 24.5% compared with 19.8% 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 156% to $246 million for a margin of 18.9%. Non-GAAP operating earnings for Software and Services were $286 million, up 3% year over year, for a non-GAAP operating margin of 32.9%.
Cash Flow and Liquidity
Motorola utilized $8 million cash for operating activities in the reported quarter against an operating cash flow of $152 million a year ago. Free cash flow in the first quarter was negative $62 million, down from $98 million in the prior year. The company repurchased $140 million worth of stock during the first quarter. As of Mar 31, 2023, MSI had $1,022 million of cash and cash equivalents with $6,014 million of long-term debt.
Guidance Up
With solid quarterly results and robust demand patterns, the company raised its earlier guidance for 2023. Non-GAAP earnings for 2023 are currently expected in the $11.21-$11.29 per share range, up from $11.10-$11.22 on year-over-year revenues of $9.725 billion to $9.775 billion, up from $9.65 billion to $9.7 billion estimated earlier, with a rise in both segments on higher demand.
For second-quarter 2023, non-GAAP earnings are expected in the $2.49-$2.54 per share range on year-over-year revenue improvement of 10-11% 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.
Headquartered in Raleigh, NC, Bandwidth Inc. (BAND - Free Report) operates as a Communications Platform-as-a-Service (CPaaS) provider, offering avant-garde software application programming interfaces for voice and messaging services. It is the only application programming interface (API) platform provider that owns a Tier 1 network with enhanced network capacity, primarily catering to business enterprises.
Bandwidth, carrying a Zacks Rank #2 (Buy), has a long-term earnings growth expectation of 25% and delivered an earnings surprise of 342%, on average, in the trailing four quarters. It enables enterprises to rapidly scale communications functionalities to a vast range of applications and devices with its easy-to-use software APIs. As a leading provider of a cloud-based communications platform, Bandwidth benefits from cost-effective operations.
Comtech Telecommunications Corp. (CMTL - Free Report) , carrying a Zacks Rank #2, is a solid 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.
IHS Holding Limited (IHS - Free Report) , carrying a Zacks Rank #2, is another key pick. Based in London, the United Kingdom, it is one of the largest independent owners, operators, and developers of shared communications infrastructure in the world by tower count.
IHS Holding has more than 39,000 towers across its 11 markets: Brazil, Cameroon, Colombia, Egypt, Kuwait, Nigeria, Peru, Rwanda, South Africa and Zambia. The stock has gained 60.7% in the past six months.
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Motorola (MSI) Q1 Earnings Beat on Record Revenues, View Up
Motorola Solutions, Inc. (MSI - Free Report) reported strong first-quarter 2023 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 first-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 the first quarter were $278 million or $1.61 per share compared with $267 million or $1.54 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 $384 million or $2.22 per share compared with $294 million or $1.70 in the year-ago quarter. The bottom line beat the Zacks Consensus Estimate by 16 cents.
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 $2,171 million, up 14.7% 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 $2,125 million.
Region-wise, quarterly revenues were up 14.3% in North America to $1,492 million due to growth in LMR, command center soft and video security products. International revenues were up 15.7% to $679 million, as growth in video security products, LMR and command center software was partially offset by adverse foreign currency impact. Acquisitions contributed $42 million to revenues, while foreign exchange headwinds were $45 million.
Segmental Performance
Net sales from Products and Systems Integration increased to $1,303 million from $1,103 million in the year-ago quarter, driven by higher demand for LMR and video security solutions. The segment’s backlog was up $601 million to $4.7 billion, primarily due to high LMR demand in North America and the International markets.
Net sales from Software and Services were up 10% to $868 million, with solid performance across command center software, LMR and video security services. The segment’s backlog increased $22 million to $9.4 billion, primarily due to higher multi-year software and services contracts in North America, partially offset by revenue recognition for the Airwave contract, unfavorable currency rates and a reduction related to the exit from the ESN contract.
Other Quarterly Details
GAAP operating earnings increased to $399 million from $239 million in the prior-year quarter, while non-GAAP operating earnings were up to $532 million from $374 million a year ago. The company ended the quarter with a record first-quarter backlog of $14.1 billion, up $623 million year over year.
Overall GAAP operating margin was 18.4%, up from 12.6%, while non-GAAP operating margin was 24.5% compared with 19.8% 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 156% to $246 million for a margin of 18.9%. Non-GAAP operating earnings for Software and Services were $286 million, up 3% year over year, for a non-GAAP operating margin of 32.9%.
Cash Flow and Liquidity
Motorola utilized $8 million cash for operating activities in the reported quarter against an operating cash flow of $152 million a year ago. Free cash flow in the first quarter was negative $62 million, down from $98 million in the prior year. The company repurchased $140 million worth of stock during the first quarter. As of Mar 31, 2023, MSI had $1,022 million of cash and cash equivalents with $6,014 million of long-term debt.
Guidance Up
With solid quarterly results and robust demand patterns, the company raised its earlier guidance for 2023. Non-GAAP earnings for 2023 are currently expected in the $11.21-$11.29 per share range, up from $11.10-$11.22 on year-over-year revenues of $9.725 billion to $9.775 billion, up from $9.65 billion to $9.7 billion estimated earlier, with a rise in both segments on higher demand.
For second-quarter 2023, non-GAAP earnings are expected in the $2.49-$2.54 per share range on year-over-year revenue improvement of 10-11% 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 #3 (Hold).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Key Picks
Headquartered in Raleigh, NC, Bandwidth Inc. (BAND - Free Report) operates as a Communications Platform-as-a-Service (CPaaS) provider, offering avant-garde software application programming interfaces for voice and messaging services. It is the only application programming interface (API) platform provider that owns a Tier 1 network with enhanced network capacity, primarily catering to business enterprises.
Bandwidth, carrying a Zacks Rank #2 (Buy), has a long-term earnings growth expectation of 25% and delivered an earnings surprise of 342%, on average, in the trailing four quarters. It enables enterprises to rapidly scale communications functionalities to a vast range of applications and devices with its easy-to-use software APIs. As a leading provider of a cloud-based communications platform, Bandwidth benefits from cost-effective operations.
Comtech Telecommunications Corp. (CMTL - Free Report) , carrying a Zacks Rank #2, is a solid 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.
IHS Holding Limited (IHS - Free Report) , carrying a Zacks Rank #2, is another key pick. Based in London, the United Kingdom, it is one of the largest independent owners, operators, and developers of shared communications infrastructure in the world by tower count.
IHS Holding has more than 39,000 towers across its 11 markets: Brazil, Cameroon, Colombia, Egypt, Kuwait, Nigeria, Peru, Rwanda, South Africa and Zambia. The stock has gained 60.7% in the past six months.