Back to top

Image: Bigstock

Here's Why Hold Strategy is Apt for Zebra Technologies (ZBRA)

Read MoreHide Full Article

Zebra Technologies Corporation (ZBRA - Free Report) is benefiting from growth across data capture solutions, services, software and RFID (radio frequency identification) despite low demand across end markets, lower sales of printing products and forex woes.

Let us discuss the factors why investors should retain the stock for the time being.

Growth Catalysts

Business Strength: Targeted list price increases and higher sales of RFID products are aiding the Asset Intelligence and Tracking segment. Higher sales of services and software, and contributions from recent acquisitions bode well for the Enterprise Visibility & Mobility segment. Also, improving supply chains and reduced product lead times augur well for the company’s growth.

Cost-Reduction Actions: ZBRA has announced expanded cost-reduction actions, including an incremental $65 million of annualized expense reductions, as it grapples with a slowdown in end markets and demand softness. Along with the previous cost-reduction actions taken over the past year, the company expects to generate approximately $100 million in cost savings annually.

Accretive Acquisition: The company’s expansion initiative is expected to drive growth. Zebra Technologies’ acquisition of Matrox Imaging (June 2022) enabled it to combine its fixed industrial scanning and machine vision portfolio with the latter’s expertise in the imaging market. Zebra Technologies expects approximately a 50-basis point contribution from acquisitions in 2023.

Rewards to Shareholders: The company continues to increase shareholders’ value through share repurchases. In the first nine months of 2023, the company repurchased shares worth $52 million. While free cash flow was negative in the first half of 2023, the company expects the same to be positive in the second half. This should support the company’s shareholder-friendly policies.

In light of the above-mentioned positives, we believe, investors should retain ZBRA stock for now, as suggested by its current Zacks Rank #3 (Hold).

Stocks to Consider

Some better-ranked companies from the Industrial Products sector are discussed below:

Graco Inc. (GGG - Free Report) presently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

GGG’s earnings surprise in the last four quarters was 7.2%, on average. In the past 60 days, estimates for Graco’s 2023 earnings have increased 1.3%. The stock has gained 13.5% in the past year.

Applied Industrial Technologies, Inc. (AIT - Free Report) presently carries a Zacks Rank of 2 and a trailing four-quarter earnings surprise of 13.9%, on average.

AIT’s earnings estimates have increased 1.9% for fiscal 2024 (ending June 2024) in the past 60 days. Shares of Applied Industrial have risen 26.8% in the past year.

A. O. Smith Corporation (AOS - Free Report) currently carries a Zacks Rank of 2. The company delivered a trailing four-quarter earnings surprise of approximately 14%, on average.

In the past 60 days, estimates for A. O. Smith’s earnings have increased 4.5% for 2023. The stock has soared 29.2% in the past year.

Published in