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Why Is Motorola (MSI) Down 4.1% Since the Last Earnings Report?

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It has been about a month since the last earnings report for Motorola Solutions, Inc. (MSI - Free Report) . Shares have lost about 4.1% in that time frame, underperforming the market.

Will the recent negative trend continue leading up to the stock's next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Second-Quarter Earnings

Motorola's second-quarter 2017 earnings (excluding 34 cents from non-recurring items) of $1.12 per share comfortably surpassed the Zacks Consensus Estimate of $1.04. Also, the bottom line improved 8.7% from the year-ago figure owing to an increase in sales, driven by the strong performance of its land and mobile radio 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.

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.

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. Adjusted earnings per share for the same quarter are projected in the band of $1.36 to $1.41.

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).

How Have Estimates Been Moving Since Then?

Following the release, investors have witnessed an upward trend infresh estimates. There have been five revisions higher for the current quarter compared to one lower.

VGM Scores

At this time, Motorola's stock has a strong Growth Score of A, a grade with the same score on the momentum front. The stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Based on our scores, the stock is suitable for growth, momentum and value investors.

Outlook

Estimates have been trending upward for the stock. The magnitude of these revisions also looks promising. It comes with little surprise the stock has a Zacks Rank #2 (Buy). We are expecting an above average return from the stock in the next few months.




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