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Motorola (MSI) Q2 Earnings Beat on Solid Revenues, View Up
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Motorola Solutions, Inc. (MSI - Free Report) reported strong second-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 second-quarter orders 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.
Net Earnings
On a GAAP basis, net earnings in the second quarter were $371 million or $2.15 per share compared with $228 million or $1.33 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 $458 million or $2.65 per share compared with $354 million or $2.07 in the year-ago quarter. The bottom line beat the Zacks Consensus Estimate by 14 cents.
Motorola Solutions, Inc. Price, Consensus and EPS Surprise
Quarterly net sales were $2,403 million, up 12.3% year over year, with solid sales in both segments across all regions 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 $2,357 million.
Region-wise, quarterly revenues were up 10.6% in North America to $1,641 million due to growth in LMR, command center soft and video security products. International revenues were up 16.2% to $762 million, as growth in video security products, LMR and command center software was partially offset by adverse foreign currency impact. Acquisitions contributed $20 million to revenues, while foreign exchange headwinds were $23 million.
Segmental Performance
Net sales from Products and Systems Integration increased to $1,437 million from $1,285 million in the year-ago quarter, driven by higher demand for LMR and video security solutions. It also exceeded our revenue estimates of $1,399.4 million. The segment’s backlog was up $496 million to $4.8 billion, primarily due to high LMR demand in North America and the International markets.
Net sales from Software and Services were up 13% to $966 million, with solid performance across command center software, LMR and video security services. The segment revenues exceeded our estimates of $956.8 million. The segment’s backlog increased $360 million to $9.5 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 $518 million from $358 million in the prior-year quarter, while non-GAAP operating earnings were up to $641 million from $497 million. The company ended the quarter with a record backlog of $14.3 billion, up $856 million year over year.
Overall GAAP operating margin was 21.6%, up from 16.7%, while non-GAAP operating margin was 26.7% compared with 23.2% 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 52% to $285 million for a margin of 19.8%. Non-GAAP operating earnings for Software and Services were $356 million, up 15% year over year, for a non-GAAP operating margin of 36.9%.
Cash Flow and Liquidity
Motorola generated $93 million cash from operating activities in the reported quarter compared with an operating cash flow of $10 million a year ago. Free cash flow in the second quarter was $40 million. The company repurchased $224 million worth of stock during the second quarter. As of Jun 30, 2023, MSI had $710 million of cash and cash equivalents with $6,015 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 $11.40-$11.48 per share range, up from $11.21-$11.29 on year-over-year higher revenues of $9.875 billion to $9.9 billion, up from $9.725 billion to $9.775 billion estimated earlier, with a rise in both segments on higher demand.
For third-quarter 2023, non-GAAP earnings are expected in the $2.99-$3.04 per share range on year-over-year revenue improvement of approximately 6% 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 strong demand across LMR products, the video security portfolio, services and software while benefiting from a solid foundation.
InterDigital, Inc. (IDCC - Free Report) , carrying a Zacks Rank #2 (Buy), delivered an earnings surprise of 170.89%, on average, in the trailing four quarters. In the last reported quarter, it pulled off an earnings surprise of 579.03%. It has a long-term earnings growth expectation of 13.9%.
It is a pioneer in advanced mobile technologies that enable wireless communications and capabilities. The company engages in designing and developing a wide range of advanced technology solutions, which are used in digital cellular and wireless 3G, 4G and IEEE 802-related products and networks.
Akamai Technologies, Inc. (AKAM - Free Report) , carrying a Zacks Rank #2, delivered an earnings surprise of 4.9%, on average, in the trailing four quarters. It has a long-term earnings growth expectation of 10%.
Akamai is a global provider of content delivery network and cloud infrastructure services. The company’s solutions accelerate and improve the delivery of content over the Internet, enabling faster response to requests for web pages, streaming of video & audio, business applications, etc. Akamai’s offerings are intended to reduce the impact of traffic congestion, bandwidth constraints and capacity limitations on customers.
Bandwidth Inc. (BAND - Free Report) , sporting a Zacks Rank #1, delivered an earnings surprise of 372.9%, on average, in the trailing four quarters.
Headquartered in Raleigh, NC, Bandwidth operates as a Communications Platform-as-a-Service provider, offering avant-garde software application programming interfaces for voice and messaging services. It is the only application programming interface platform provider that owns a Tier 1 network with enhanced network capacity, primarily catering to business enterprises.
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Motorola (MSI) Q2 Earnings Beat on Solid Revenues, View Up
Motorola Solutions, Inc. (MSI - Free Report) reported strong second-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 second-quarter orders 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.
Net Earnings
On a GAAP basis, net earnings in the second quarter were $371 million or $2.15 per share compared with $228 million or $1.33 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 $458 million or $2.65 per share compared with $354 million or $2.07 in the year-ago quarter. The bottom line beat the Zacks Consensus Estimate by 14 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 $2,403 million, up 12.3% year over year, with solid sales in both segments across all regions 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 $2,357 million.
Region-wise, quarterly revenues were up 10.6% in North America to $1,641 million due to growth in LMR, command center soft and video security products. International revenues were up 16.2% to $762 million, as growth in video security products, LMR and command center software was partially offset by adverse foreign currency impact. Acquisitions contributed $20 million to revenues, while foreign exchange headwinds were $23 million.
Segmental Performance
Net sales from Products and Systems Integration increased to $1,437 million from $1,285 million in the year-ago quarter, driven by higher demand for LMR and video security solutions. It also exceeded our revenue estimates of $1,399.4 million. The segment’s backlog was up $496 million to $4.8 billion, primarily due to high LMR demand in North America and the International markets.
Net sales from Software and Services were up 13% to $966 million, with solid performance across command center software, LMR and video security services. The segment revenues exceeded our estimates of $956.8 million. The segment’s backlog increased $360 million to $9.5 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 $518 million from $358 million in the prior-year quarter, while non-GAAP operating earnings were up to $641 million from $497 million. The company ended the quarter with a record backlog of $14.3 billion, up $856 million year over year.
Overall GAAP operating margin was 21.6%, up from 16.7%, while non-GAAP operating margin was 26.7% compared with 23.2% 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 52% to $285 million for a margin of 19.8%. Non-GAAP operating earnings for Software and Services were $356 million, up 15% year over year, for a non-GAAP operating margin of 36.9%.
Cash Flow and Liquidity
Motorola generated $93 million cash from operating activities in the reported quarter compared with an operating cash flow of $10 million a year ago. Free cash flow in the second quarter was $40 million. The company repurchased $224 million worth of stock during the second quarter. As of Jun 30, 2023, MSI had $710 million of cash and cash equivalents with $6,015 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 $11.40-$11.48 per share range, up from $11.21-$11.29 on year-over-year higher revenues of $9.875 billion to $9.9 billion, up from $9.725 billion to $9.775 billion estimated earlier, with a rise in both segments on higher demand.
For third-quarter 2023, non-GAAP earnings are expected in the $2.99-$3.04 per share range on year-over-year revenue improvement of approximately 6% 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 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
InterDigital, Inc. (IDCC - Free Report) , carrying a Zacks Rank #2 (Buy), delivered an earnings surprise of 170.89%, on average, in the trailing four quarters. In the last reported quarter, it pulled off an earnings surprise of 579.03%. It has a long-term earnings growth expectation of 13.9%.
It is a pioneer in advanced mobile technologies that enable wireless communications and capabilities. The company engages in designing and developing a wide range of advanced technology solutions, which are used in digital cellular and wireless 3G, 4G and IEEE 802-related products and networks.
Akamai Technologies, Inc. (AKAM - Free Report) , carrying a Zacks Rank #2, delivered an earnings surprise of 4.9%, on average, in the trailing four quarters. It has a long-term earnings growth expectation of 10%.
Akamai is a global provider of content delivery network and cloud infrastructure services. The company’s solutions accelerate and improve the delivery of content over the Internet, enabling faster response to requests for web pages, streaming of video & audio, business applications, etc. Akamai’s offerings are intended to reduce the impact of traffic congestion, bandwidth constraints and capacity limitations on customers.
Bandwidth Inc. (BAND - Free Report) , sporting a Zacks Rank #1, delivered an earnings surprise of 372.9%, on average, in the trailing four quarters.
Headquartered in Raleigh, NC, Bandwidth operates as a Communications Platform-as-a-Service provider, offering avant-garde software application programming interfaces for voice and messaging services. It is the only application programming interface platform provider that owns a Tier 1 network with enhanced network capacity, primarily catering to business enterprises.