Here's Why Zebra Technologies (ZBRA) is Worth Buying Now
We believe that Zebra Technologies Corporation ZBRA is a solid choice for investors seeking exposure in the machinery space.
The stock, with $9.1 billion of market capitalization, has been upgraded to a Zacks Rank #1 (Strong Buy) on Aug 22. The company delivered better-than-expected results in the four trailing quarters, with an average positive earnings surprise of 13.28%.
Why the Upgrade?
We are providing a snapshot of how Zebra Technologies fared in second-quarter 2018. The company’s earnings of $2.48 per share surpassed the Zacks Consensus Estimate by 10.2%. Net sales went up 12.8% year over year, on the back of 10.6% growth in organic sales. Gross margin improved year over year, driven by forex gains, favorable business mix and the execution of the go-to-market strategy.
In the quarters ahead, Zebra Technologies is poised to gain from a solid demand for its products (related to mobile computing, scanning and printing) and services as well as efforts to boost digital innovation and strengthen relationships with customers. Moreover, business seems to grow in the various end markets — including retail/e-commerce, healthcare, transportation & logistics, and manufacturing — served through both organic and inorganic means. Furthermore, the company’s restructuring measure to lower its debt burden will result in annualized interest expense savings.
In August 2018, Zebra Technologies introduced Healthcare Specialization Program for customers in North America, Australia, New Zealand, South Korea, India and Latin America. In the same month, the company celebrated the 10th year of its business deal with Auto Parte Y Mas S.A.’s distribution center. Moreover, the company completed acquiring Xplore Technologies Corporation. The buyout will strengthen the company’s existing data capture, enterprise mobile computing and printing portfolios.
For 2018, Zebra Technologies now predicts net sales to grow 10-12%, an improvement over the previous prediction of 6-9%. The revised guidance includes 2% gain from favorable foreign currency movements. In addition to sales growth, the bottom line will gain from lower interest expenses, now predicted to be $80-85 million versus the earlier forecast of $85-$90 million, and lower tax rates of 15-16% (versus 16-17% anticipated earlier). Free cash flow generation will be approximately $525 million, up from $50 million anticipated earlier.
In the past 30 days, the company’s earnings estimates for both 2018 and 2019 have been revised upward by six brokerage firms. The Zacks Consensus Estimate now stands at $10.36 for 2018 and $11.38 for 2019, reflecting growth of 8.8% and 12% from the respective 30-day-ago tallies.
Zebra Technologies Corporation Price and Consensus
Zebra Technologies Corporation Price and Consensus | Zebra Technologies Corporation Quote
Moreover, the company’s price performance has been impressive. The stock has yielded 15.6% return in the past month, outperforming 9.2% growth recorded by the industry.
Other Stocks to Consider
Other top-ranked stocks worth considering in the Zacks Industrial Products sector are Altra Industrial Motion Corp. AIMC, Chart Industries, Inc. GTLS and Barnes Group Inc. B. While Altra Industrial Motion sports a Zacks Rank #1, both Chart Industries and Barnes Group carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
In the past 60 days, earnings estimates for each of these stocks have improved for the current year and the next year. The average positive earnings surprise for the last four quarters was 4.01% for Altra Industrial Motion, 29.36% for Chart Industries and 6.88% for Barnes Group.
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