Earnings Preview: Motorola Solutions - Analyst Blog
January 19 2012 - 4:00AM
Zacks
Motorola Solutions
Inc. (MSI) is scheduled to release its fourth quarter 2011
results on Wednesday, January 25, before the closing bell. The
current Zacks Consensus Estimate for the fourth quarter is pegged
at 74 cents, representing an annualized growth of negative
9.05%.
With respect to earnings surprises
over the trailing four quarters, Motorola Solutionshas outperformed
the Zacks Consensus Estimate in three of the last four quarters.
The average earnings surprise was a positive 25.01%, implying that
the company has outdone the Zacks Consensus Estimate by the same
magnitude over the same period.
Third Quarter
Recap
On October 27, 2011, Motorola
Solutionsreported its third quarter 2011 financial results.
Quarterly total revenue was $2,105
million, up 10.3% year over year and exceeded the Zacks Consensus
Estimate of $2,091 million.
Quarterly GAAP net income from
continuing operation was $253 million or 45 cents per share
compared with $211 million or a loss of 4 cents per share in the
prior-year quarter. However, adjusted (excluding special items) EPS
in the third quarter of 2011 was 56 cents, surpassing the Zacks
Consensus Estimate of 54 cents.
Quarterly gross margin was 50.4%
compared with 50.5% in the prior-year quarter. Quarterly operating
margin came in at 12% versus 11.1% in the prior-year quarter.
Agreement of Estimate
Revisions
In the last 30 days, out of the six
analysts covering the stock, none increased or decreased their
estimates for the fourth quarter of 2011. Likewise, for the first
quarter of fiscal 2012, out of the five analysts, none of the
analysts raised the estimates but one analyst reduced the same for
the period.
In the last 30 days, out of the six
analysts covering the stock for fiscal 2011 and fiscal 2012, none
increased the estimates for the period; however, one analyst
slashed the EPS estimate for fiscal 2012.
Magnitude of Estimate
Revisions
During the last 30 days, the
current Zacks Consensus Estimate for the fourth quarter was in line
with the previous estimate of 74 cents. For the first quarter of
2012, the current Zacks Consensus Estimate was a penny short of the
previous Zacks Consensus Estimate of 45 cents. For fiscal 2011, the
current Zacks Consensus Estimate was at par with the previous
estimate of $2.26. However, for 2012, the current Zacks Consensus
Estimates was 2 cents below the previous Zacks Consensus Estimate
of $2.57.
Earning
Surprises
The current Zacks Consensus
Estimates for the ongoing quarter reflects a 0.00% upside potential
while the first quarter of 2012 reflects a 15.56% downside risk
(essentially a proxy for future earning surprises). Similarly,
fiscal 2011 contain a 0.00% growth potential. However, 2012 has a
downside potential of 12.55%.
Our
Recommendation
Motorola Solutions continues to
report solid financial results with huge margin improvement.
Furthermore, the company’s business model remains compelling and we
believe that the company will be able to maintain its current
top-line growth going forward primarily due to the critical nature
of the public safety network in the U.S. and massive growth
potential in the Middle East.
However, the company is heavily
dependent on government expenditures for its revenue.Therefore, a
slowdown in the government expenditure due to budgetary pressures,
particularly at the state and local level, may significantly
jeopardize the company’s overall financials. Moreover,the decision
of Sprint Nextel Corp. (S) to gradually phase-out
iDEN network is also a setback for the company as Motorola
Solutions was expecting huge top-line growth from that project.We,
thus, maintain our long-term Neutral recommendation for Motorola
Solutions Inc.
Currently, Motorola SolutionsInc.
has a Zacks #4 Rank, implying a short-term Sell rating.
MOTOROLA SOLUTN (MSI): Free Stock Analysis Report
SPRINT NEXTEL (S): Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research
Motorola Solutions (NYSE:MSI)
Historical Stock Chart
From May 2024 to Jun 2024
Motorola Solutions (NYSE:MSI)
Historical Stock Chart
From Jun 2023 to Jun 2024