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Will Higher Revenues Boost Motorola's (MSI) Q1 Earnings?

Zacks Equity Research

Motorola Solutions, Inc. MSI is scheduled to report first-quarter 2019 results after the closing bell on May 2. In the last reported quarter, the company delivered a positive earnings surprise of 5.6%. Notably, Motorola surpassed the Zacks Consensus Estimate for earnings in each of the last four quarters, the average beat being 13.2%.

For the first quarter, the company is likely to report higher consolidated revenues on a year-over-year basis, supported by healthy growth trajectory. Whether this could result in an earnings beat remains to be seen.

Factors to Consider

During the quarter, Motorola acquired South Carolina-based Avtec, Inc. — a provider of dispatch solutions for public safety and commercial customers — for an undisclosed amount. The buyout will likely expand Motorola’s public safety and commercial portfolios, while allowing it to offer an end-to-end platform for customers to communicate, coordinate resources and secure their facilities. This is expected to benefit the company’s upcoming results.

With robust inorganic and organic growth, disciplined capital deployment and favorable growth dynamics, the Products & Systems Integration segment is likely to record revenues of $1,049 million in the first quarter, up from $801 million reported in the year-ago quarter.

The Services and Software segment has been another area of significant focus. During the quarter, Motorola was selected by the North West Ambulance Service NHS Trust — the second largest ambulance trust in England — to provide 450 community-first responders with its ADVISOR TPG2200 TETRA two-way pagers. The company’s new pagers are likely to upgrade mission-critical alert systems of volunteer first responders on the Airwave public safety network while improving response time during medical emergencies.

During the quarter, Motorola was also chosen by Springfield, OH, and Clark County, OH, to provide command center software to receive incoming 9-1-1 calls, share decisive incident information and communicate across agencies for an appropriate response. Management expects the segment to grow at a faster rate than Products and Systems Integration segment, and drive meaningful operating margin expansion in 2019 and beyond. However, the Services and Software segment is likely to record revenues of $578 million in the first quarter, down from $667 million generated a year ago.

With solid organic growth driven by continued strength in demand curve, Motorola is likely to record healthy top-line growth. The Zacks Consensus Estimate for total revenues for the first quarter is pegged at $1,630 million. In the year-earlier quarter, it generated revenues of $1,468 million.

Earnings Whispers

Our proven model does not show that Motorola is likely to beat earnings this quarter as it does not possess the key components. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. This is not the case here as you will see below:

Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and Zacks Consensus Estimate, is -1.59% as the former is pegged at $1.13 while the latter is pegged at $1.15. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Motorola Solutions, Inc. Price and EPS Surprise

 

Motorola Solutions, Inc. Price and EPS Surprise

Motorola Solutions, Inc. price-eps-surprise | Motorola Solutions, Inc. Quote

Zacks Rank: Motorola has a Zacks Rank #3. While this increases the predictive power of ESP, we need to have a positive ESP to make us confident of an earnings beat.

Note that we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated) going into the earnings announcement, especially when the company is seeing a negative estimate revisions momentum.

Stocks to Consider

Here are some companies that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter:

Molina Healthcare, Inc. MOH has an Earnings ESP of +3.49% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

PotlatchDeltic Corporation PCH has an Earnings ESP of +9.81% and a Zacks Rank #2.

The Earnings ESP for Werner Enterprises Inc. WERN is +0.91 % and it carries a Zacks Rank of 3.

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