MSI Motorola Solutions Inc

Motorola Solutions Inc. (MSI), a leading communications equipment manufacturer, declared excellent fourth quarter 2011 financial results, beating both the top and bottom line estimates. The solid performance was mainly on the back of solid demand across both Government and Enterprise segments.

Fourth Quarter Highlights

Quarterly GAAP net income from continuing operation was $184 million or 54 cents per share compared with $292 million or 49 cents per share in the prior-year quarter. However, adjusted (excluding special items) EPS in the reported quarter came in at 78 cents, surpassing the Zacks Consensus Estimate of 74 cents. Quarterly total revenue was $2,300 million, up 5% year over year and marginally beat the Zacks Consensus Estimate of $2,286 million.

Quarterly gross margin was 50.4% compared with 49.8% in the prior-year quarter. Quarterly operating margin came in at 12% versus 12.4% in the prior-year quarter.

Agreements of Analysts

Of the four analysts covering the stock in the last 7 days, none revised the estimates for the first and second quarter of fiscal 2012. Likewise, for fiscal 2012 and fiscal 2013, out of the six analysts covering the stock in the last 7 days, none revised the estimates.

Currently, the Zacks Consensus EPS Estimate for the first quarter of fiscal 2012 is pegged at 46 cents, which indicates a loss of 0.54% year over year. However, for the second quarter of fiscal 2012, the Zacks Consensus EPS Estimate of 58 cents reflects a gain of 2.19%. Likewise, for fiscal 2012 and fiscal 2013, the Zacks Consensus EPS Estimates are pegged at $2.64 and $3.08 indicating a profit of 16.3% and 16.79%, respectively.

Magnitude of Estimate Revisions

During the last 7 days, the current Zacks Consensus Estimates for the first and second quarter of 2012 were in line with the previous estimates of 46 cents and 58 cents per share, respectively.

Similarly, for fiscal 2012 and 2012, the current Zacks Consensus Estimates were in line with the previous estimate of $2.64 and $3.08 per share, respectively.

Earning Surprises

Motorola Solutionsproduced an earnings surprise of 4 cents or 5.41%. The ongoing quarter and the second quarter of 2012 contain downside potentials of 6.52% and 0.00%, respectively (essentially a proxy for future earnings surprises).

Similarly, fiscal 2012 and 2013 reflect downside risks of 1.89% and 1.95%, respectively.

Our Recommendation

Motorola Solutions is the largest developer of public safety products and commands nearly half of the total U.S market. The company entered into an agreement with Verizon Wireless to install a standard-based public safety broadband network for mission-critical operations leveraging on the nationwide LTE network of the carrier. Verizon Wireless is a joint venture between Verizon Communications Inc. (VZ) and Vodafone Group plc. (VOD). 

We, thus, maintain our long-term Neutral recommendation on Motorola Solutions Inc. Currently, Motorola Solutions Inc. has a Zacks #4 Rank, implying a short-term Sell rating on the stock. This was primarily due to its current valuation, which soared over 29% last year.

About Earnings Estimate Scorecard

Len Zacks, PhD in mathematics from MIT, proved over 30 years ago that earnings estimate revisions are the most powerful force impacting stock prices. He turned this ground breaking discovery into two of the most celebrating stock rating systems in use today. The Zacks Rank for stock trading in a 1 to 3 month time horizon and the Zacks Recommendation for long-term investing (6+ months). These “Earnings Estimate Scorecard” articles help analyze the important aspects of estimate revisions for each stock after their quarterly earnings announcements. Learn more about earnings estimates and our proven stock ratings at: http://www.zacks.com/education/

 
MOTOROLA SOLUTN (MSI): Free Stock Analysis Report
 
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VERIZON COMM (VZ): Free Stock Analysis Report
 
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