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Motorola (MSI) Tops Q2 Earnings Estimates, Raises FY17 View

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Motorola Solutions Inc.’s (MSI - Free Report) second-quarter 2017 earnings of 1.06 per share (excluding 28 cents from non-recurring items) comfortably surpassed the Zacks Consensus Estimate of 99 cents. Also, the bottom line improved 2.91% from the year-ago figure owing to an increase in sales, driven by the strong performance of its land and mobile radio (LMR) operations.

Revenues increased 4.7% from the year-ago quarter to $1,497 million and also surpassed the Zacks Consensus Estimate of $1,463.73 million.

Operating margin (on an adjusted basis) came in at 21.9% in the quarter compared with 22.7% a year ago. The decline was attributable to currency related headwinds arising from Motorola’s acquisition of Airwave Solutions among other factors.

Meanwhile, the company is constantly looking to expand its operations. To this end, Motorola inked a deal with Airbus SE last month to acquire Plant Holdings, Inc., which holds the Airbus DS Communications business.

Operating Results

Product segment revenues came in at $848 million in the reported quarter, up 5.9% on a year-over-year basis. Service revenues totaled to $649 million, up 3.2% year over year. The upside was driven by strong performance in the Americas region.

Additionally, Motorola generated $173 million of cash from operations in the quarter, reflecting a substantial decrease from a year-ago. Higher working capital requirement due to the implementation of a new ERP system contributed to the decline.

In fact, the company exited the second quarter with $805 million in cash & cash equivalents compared with $1,030 million at the end of 2016. Long-term debt was $4,421 million in the end of the quarter compared with $4,392 million at the end of 2016.

Share Repurchase and Dividends

Motorola returned approximately $80 million to shareholders through buybacks, and $77 million in dividends in the reported quarter. Notably, its efforts to reward shareholders through dividends/buybacks are encouraging.

Motorola Solutions, Inc. Price, Consensus and EPS Surprise

 

Motorola Solutions, Inc. Price, Consensus and EPS Surprise | Motorola Solutions, Inc. Quote

Outlook

The company expects revenues for the third quarter of 2017 to improve in the band of 3% to 4%, on a year-over-year basis. While adjusted earnings per share for the same quarter are projected in the band of $1.36 to $1.41, the Zacks Consensus Estimate is pegged at $1.33 per share, lower than the guided range.

For the full-year 2017, Motorola now expects revenues to increase in the band of 3% to 4% (previous guidance had called for growth of approximately 2%). Earnings (on an adjusted basis) are projected in the band of $5.20 to $5.30 per share (the earlier view had projected earnings in the range of $5.08 to $5.23 per share). The Zacks Consensus Estimate is currently pegged at $4.92 per share.

Zacks Rank & Stocks to Consider

Motorola currently carries a Zacks Rank #4 (Sell). Investors interested in the broader Computer & Technology sector may consider BlackBerry Ltd. , Nokia Corporation (NOK - Free Report) and ADTRAN (ADTN - Free Report) carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Shares of BlackBerry, Nokia and ADTRAN have gained over 37%, 35 and 3%, respectively, so far this year.

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