Why Is Zebra (ZBRA) Up 0.4% Since Last Earnings Report?

It has been about a month since the last earnings report for Zebra Technologies (ZBRA). Shares have added about 0.4% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Zebra due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Zebra Q3 Earnings & Revenues Beat Estimates, Up Y/Y

Zebra reported solid third-quarter 2021 results, with earnings and sales surpassing estimates by 14.3% and 3%, respectively.

The company’s adjusted earnings per share in the reported quarter came in at $4.55, outpacing the Zacks Consensus Estimate of $3.98. The bottom line also increased 39.1% on a year-over-year basis.

Revenues & Segmental Performance

In the third quarter, Zebra generated net sales of $1,436 million, reflecting a year-over-year increase of 26.9%. The improvement was driven by a 23.2% increase in organic sales, a 1.3% contribution from acquisitions, and a 2.4% gain from movements in foreign currencies. The top line surpassed the Zacks Consensus Estimate of $1,395 million.

The company reports revenues under the segments discussed below:

Revenues from the Asset Intelligence & Tracking segment were $386 million, up 13.9% year over year. The increase was driven by a 12.1% growth in organic sales and a 1.8% gain from movements in foreign currencies.

The Enterprise Visibility & Mobility segment’s revenues were $1,050 million, up 32.1% year over year. The results benefited from 27.9% growth in organic sales, 1.6% benefits from acquisitions, and a 2.6% gain from movements in foreign currencies.

Margin Profile

In the third quarter, Zebra’s cost of sales totaled $790 million, reflecting a rise of 23.6% from the year-ago quarter. Total operating expenses in the quarter were $409 million, reflecting an increase of 19.2%.

Net income in the reported quarter increased 71.6% year over year to $199 million while adjusted margin expanded 370 basis points to 13.9%.

Balance Sheet and Cash Flow

Exiting the third quarter, the company had cash and cash equivalents of $307 million, down 3.5% from $318 million recorded at the end of the prior quarter. Long-term debt was down 0.4% sequentially to $940 million.

In the first nine months of 2021, it generated net cash of $836 million from operating activities compared with $531 million in the year-ago period. In the same time frame, its net debt repayments totaled $256 million and interest payments were $25 million. Capital expenditure was $38 million. Free cash flow was $798 million, reflecting an increase of 65.6% from the year-ago period.

In the first nine months of 2021, the company repurchased shares worth $25 million compared with $200 million in the year-ago period.

Outlook

For the fourth quarter of 2021, Zebra estimates adjusted net sales to grow 8-12% on a year-over-year basis. Adjusted earnings are projected to lie in the range of $4.20 to $4.50. Adjusted effective tax rate is likely to be about 18%.

For 2021, Zebra anticipates adjusted net sales growth in excess of 25% on a year-over-year basis, compared with rise of 23-25% predicted earlier. For the year, the company expects free cash flow to be a minimum of $950 million.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended upward during the past month.

VGM Scores

At this time, Zebra has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Zebra has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.

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