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Will Top-Line Contraction Dent Motorola's (MSI) Q1 Earnings?

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Motorola Solutions, Inc. (MSI - Free Report) is scheduled to report first-quarter 2020 results after the closing bell on May 7. In the last reported quarter, the company delivered a positive earnings surprise of 5.4%, surpassing the Zacks Consensus Estimate by 15 cents. In the first quarter, the company is likely to have generated lower consolidated revenues on a year-over-year basis due to the adverse economic impact triggered by the coronavirus pandemic.

Factors at Play

During the first quarter, Motorola augmented mission-critical communications infrastructure among the first-responder community in the U.S. Navy by leveraging its P25 trunked network for the deployment of Land Mobile Radio (LMR) communication for easier access, enhanced coverage and stronger security. The company boosted the security capabilities of Oakland, CA, with the deployment of the Disaster Recovery as a Service (DRaaS) solution of its PremierOne CAD software. The cloud-based DRaaS system is likely to offer all-permissive, fully-functional connectivity to the city residents to enable emergency communication services during disasters. Motorola also inked a contract with SFR, a leading French telecommunications company, to provide the mission-critical push-to-talk (PTT) solution. The broadband PTT service will be deployed by SFR through its nationwide network. These are expected to get reflected positively in the upcoming quarterly results.

Such innovative product launches and system deployments are likely to have translated into incremental revenues for the Products & Systems Integration segment. The Zacks Consensus Estimate for the segment’s revenues is pegged at $1,051 million, indicating a rise of 11.2% from the prior-year quarter’s reported number.

The Services and Software segment has been another area of significant focus. The company unveiled a 900-MHz private broadband solution during the quarter for the development of U.S. critical infrastructure entities across oil, gas and utility sectors. The addition of advanced communication solutions is expected to significantly boost the mission-critical ecosystem and render seamless connectivity to effectively mitigate operating risks.

The consensus mark for Services and Software revenues is pegged at $640 million for the first quarter, indicating a decline from $712 million generated in the previous quarter. This is due to a tough year-over-year comparison, as the company faced challenging macroeconomic conditions in the quarter due to the virus outbreak.

Despite healthy demand across land mobile radio products and other devices, driven by a comprehensive suite of services that ensures continuity and reduces risks related to critical communications operations, Motorola is likely to have recorded top-line contraction. The Zacks Consensus Estimate for total revenues in the first quarter is pegged at $1,633 million. In the year-earlier quarter, it generated revenues of $1,657 million. The consensus mark for earnings is currently pegged at $1.25 per share, indicating a decline from $1.28 reported in the year-earlier quarter. However, during the fourth-quarter 2019 earnings release, management expected first-quarter 2020 non-GAAP earnings to be in the $1.30-$1.35 per share range on year-over-year revenue growth of about 2%.

Earnings Whispers

Our proven model predicts an earnings beat for Motorola this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. This is perfectly the case here.

Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is +2.56% with the former pegged at $1.28 and the latter at $1.25. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Motorola Solutions, Inc. Price and EPS Surprise

 

Motorola Solutions, Inc. Price and EPS Surprise

 

Motorola Solutions, Inc. price-eps-surprise | Motorola Solutions, Inc. Quote

Zacks Rank: Motorola currently has a Zacks Rank #3.

Other Stocks to Consider

Here are some other companies you may want to consider, as our model shows that these too have the right combination of elements to post an earnings beat this quarter:

Microchip Technology Incorporated (MCHP - Free Report) has an Earnings ESP of +0.76% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Earnings ESP for Sonos, Inc. (SONO - Free Report) is +11.54% and it carries a Zacks Rank of 3.

The Earnings ESP for Cisco Systems, Inc. (CSCO - Free Report) is +0.72% and it carries a Zacks Rank of 3.

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