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Motorola (MSI) Q4 Earnings & Revenues Top, '18 View Issued

Zacks Equity Research
Updated

Motorola Solutions Inc.’s MSI fourth-quarter 2017 earnings of $2.10 per share (excluding $5.66 from non-recurring items) surpassed the Zacks Consensus Estimate of $2.03. Also, the bottom line improved 3.5% 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 3.9% from the prior-year quarter to $1,957 million. The top line also outpaced the Zacks Consensus Estimate of $1,946 million.

The earnings and revenues beat pleased investors. As a result, the stock has inched up 1.6% in after-hours trading on Feb 1.

Operating margin (on an adjusted basis) in the fourth quarter of 2017 came in at 29.4% compared with 28.7% in the year-earlier quarter.

Operating Results

Product segment revenues came in at $1,233 million in the reported quarter, up 0.6% on a year-over-year basis. Service revenues totaled $724 million, up 10.2% year over year. This upside was driven by a solid performance across all regions.

Additionally, Motorola generated $761 million of cash from operations in the quarter under review, reflecting a substantial rise from the tally in the comparable period last year. Free cash flow as of Dec 31, 2017 was $740 million, up 63.4% from the level at 2016-end. Improved working capital performance and higher operating earnings drove this surge.

The company exited the fourth quarter with $1,268 million in total cash & cash equivalents compared with $1,030 million at the end of 2016. Long-term debt was $4,419 million at the end of the reported quarter compared with $4,392 million at year-end 2016. Additionally, this Schaumburg, IL-based company bought back shares worth $125 million  and made dividend payments worth $76 million  in the fourth quarter.

Motorola Solutions, Inc. Price, Consensus and EPS Surprise

 

Motorola Solutions, Inc. Price, Consensus and EPS Surprise | Motorola Solutions, Inc. Quote

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Q1 & 2018 Outlook

Motorola anticipated revenues to grow approximately 7% in the first quarter of 2018. While adjusted earnings per share are expected between 83 cents and 88 cents in the quarter. The Zacks Consensus Estimate for first-quarter 2018 earnings is pegged at 80 cents per share on revenues of $1.33 billion.

For 2018, the company expects revenues to improve roughly 5% while adjusted earnings per share are estimated in the range of $6.50-$6.65. The figures assume current foreign exchange rates and an adjusted effective tax rate of around 25%. The Zacks Consensus Estimate for earnings stands at $5.94 on revenues of $6.50 billion.

Another Important Development

Motorola has entered into an agreement with Avigilon to acquire the company in an all-cash transaction. Per the agreement, Motorola will purchase all of Avigilon’s outstanding shares for CAD $27 per share. The transaction is valued at approximately $1 billion and inclusive of Avigilon’s net debt. The buyout will widen Motorola’s mission-critical communications technologies portfolio.

Zacks Rank & Other Key Picks

Motorola sports a Zacks Rank #1 (Strong Buy). Other top-ranked stocks in the broader Computer and Technology sector include InterDigital, Inc. IDCC, Progress Software Corporation PRGS and DST Systems, Inc. DST with the same bullish Zacks Rank of 1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Shares of InterDigital, Progress Software and DST Systems have gained more than 7%, 17% and 39%, respectively, in the last three months.

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