Motorola Beats Earnings, Lags Rev

Zacks

Motorola Solutions Inc. (MSI) reported mixed financial results for the second quarter of 2013. Management has reduced its financial outlook for full-year 2013 for the second time. However, the board of directors has announced several steps to enhance shareholders’ wealth.

Quarterly GAAP net income from continuing operations was $258 million or 94 cents per share compared with $182 million or 60 cents per share in the prior-year quarter. Adjusted earnings per share of $1.03 were significantly higher than the Zacks Consensus Estimate of 92 cents. However, quarterly total revenue was $2,107 million, down 1.9% year over year and also below the Zacks Consensus Estimate of $2,149 million.

Quarterly gross margin was 48.8% compared with 49.3% in the prior-year quarter. Operating income, in the reported quarter, was $266 million, down by 4.3% year over year. Quarterly operating margin was 12.6% compared with 12.9% in the prior-year quarter. During the second quarter of 2013, Motorola Solutions repurchased shares worth $357 million.

During the reported quarter, Motorola Solutions generated $82 million in cash from operations compared with $254 million in the year-ago quarter. Quarterly free cash flow was $39 million compared with a $202 million in the prior-year quarter.

At the end of the first half of 2013, Motorola Solutions had $3,358 million in cash, cash equivalents and marketable securities compared with $3,603 million at the end of 2012. Total debt, at the end of the reported quarter, was $2,456 million compared with $1,859 million at the end of 2012. The debt-to-capitalization ratio at the end of second-quarter 2013 was 0.47 compared with 0.36 at the end of 2012.

Government Segment

Quarterly total revenue was $1,451 million, down 1% year over year. Operating income came in at $215 million, up 9% year over year.

EnterpriseSegment

Quarterly total revenue was $656 million, down 5% year over year. Operating income stood at $51 million, down 37% year over year.

Performance by Category

Quarterly Product revenues were $1,479 million, down 5.4% year over year. Services revenues were $628 million, up 7.4% year over year. Quarterly Product gross margin was 53% compared with 54.5% in the year-ago quarter. Services gross margin was 39% compared with 35.7% in the year-ago quarter.

Shareholders’ Wealth Enhancement

The board of directors of Motorola Solutions has decided to raise its quarterly cash dividend by 19% to 31 cents per share. The next quarterly dividend will be payable on Oct 15, 2013, to stockholders of record at the close of business on Sep 13, 2013. Moreover, the board has authorized an additional $2 billion of share repurchase program with no expiration date.

Financial Outlook

Motorola Solutions expects revenues in the third quarter of 2013 to remain the same or fall 3% year over year. Non-GAAP earnings per share from continuing operations are expected in the range of 97 cents to $1.02. The tax rate is expected to be 10%-13%. For fiscal 2013, the total revenue is expected to remain flat or rise 1% year over year, while non-GAAP operating income is expected to be 18% of the total revenue.  

Other Stocks to Consider

Motorola Solutions currently has a Zacks Rank #3 (Hold). Other stocks worth considering in this sector include Mitel Networks Corp. (MITL), Sonus Networks Inc. (SONS) and ViaSat Inc. (VSAT). All three carry a Zacks Rank #2 (Buy).

Read the Full Research Report on MSI

Read the Full Research Report on MITL

Read the Full Research Report on SONS

Read the Full Research Report on VSAT

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