Earnings Scorecard: Motorola Solutions - Analyst Blog
09 Maggio 2012 - 5:30PM
Zacks
Following the first quarter earnings announcement on April 25,
none of the analysts covering Motorola Solutions
Inc. (MSI) have made any revisions to their estimates. The
brokers have retained their estimates based on the belief that the
company will do well in the government segment but remain concerned
about the increasing competitive scenario in the enterprise
segment.
First Quarter Highlights
On a GAAP basis, quarterly net income was $159 million or 50
cents per share, compared with $367 million or $1.07 per share in
the year-ago quarter. Adjusted EPS of 50 cents was well ahead of
the Zacks Consensus Estimate of 47 cents.
Quarterly total revenue of $1,956 million was up 6.7% year over
year, and marginally above the Zacks Consensus Estimate of $1,918
million. Operating margin was 11.9% compared with 9.2% in the
prior-year quarter.
Agreement of Analysts
Of the 5 analysts covering the stock in the last 7 days, none
have revised the estimates for the second quarter of 2012.
Similarly, for the third quarter of 2012, none of the 5 analysts
covering the stock have made any changes to their estimates.
For fiscal 2012, out of the 6 analysts covering the stock in the
last 7 days, none have revised their estimates. The trend is
similar for fiscal 2013 as well, where none of the 6 analysts
covering the stock have revised their estimates.
Currently, the Zacks Consensus Estimate for the second quarter
of fiscal 2012 is 62 cents, with a projected annual growth of
9.12%. For the third quarter of fiscal 2012, the Zacks Consensus
Estimate of 69 cents indicates an annual gain of 23.93%.
Magnitude of Estimate Revisions
As a result of analysts’ reluctance to revise estimates either
way over the past 7 days, the Zacks Consensus Estimates for the
second and third quarter of 2012 has remained static at 62 and 69
cents per share, respectively. Similarly for fiscal 2012 and 2013,
the current Zacks Consensus Estimates has remained unchanged over
the past week at $2.77 and $3.32,
respectively.
Earnings Surprises
The company has outdone the Zacks Consensus estimates in all of
the four previous quarters. In the first quarter of 2012, Motorola
Solutions outpaced the estimate by 3 cents or 6.38%.
The estimates for the ongoing quarter of fiscal 2012 contain a
downside risk of 1.61%, while the estimates for the third quarter
of 2012 contain a downside risk of 1.45% (essentially a proxy for
future earnings surprises). Fiscal 2012 estimates contain a
downside risk of 1.44%, while the estimates for fiscal 2013 contain
a downside risk of 5.42%.
Our Recommendation
We believe that Motorola Solution will benefit from the U.S.
government’s initiative to build a nationwide super-fast public
safety network. The company has inked a deal with
Verizon Communication Inc (VZ) to
install a public safety broadband network based on the Verizon’s
nationwide LTE network, which will act as a positive catalyst for
Motorola Solutions.
Moreover, Motorola Solutions caters to a large set of industries
including Transportation & Logistics, Public safety,
Hospitality, Retail, Oil & natural gas and more, which creates
significant opportunities for the company.
However, the ongoing macroeconomic uncertainty may restrict
government spending, which might act as a headwind for the company
as Motorola derives a major part of its revenue from the government
agencies. Furthermore, Sprint-Nextel Corp’s (S)
decision to gradually phase out iDEN network will hamper its future
prospects. Pending legal issues in several European countries act
as an added concern for Motorola Solutions.
Considering these factors, we maintain our long-term Neutral
recommendation on Motorola Solutions. Currently, Motorola Solutions
has a Zacks #2 Rank, implying a short-term buy rating on the
stock.
About Earnings Estimate Scorecard
As a PhD from MIT, Len Zacks 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
SPRINT NEXTEL (S): Free Stock Analysis Report
VERIZON COMM (VZ): Free Stock Analysis Report
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