Motorola (MSI) Up 0.2% Since Last Earnings Report: Can It Continue?
A month has gone by since the last earnings report for Motorola (MSI). Shares have added about 0.2% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Motorola 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 catalysts.
Motorola Beats Q4 Earnings Estimates on Solid Demand
Motorola reported strong fourth-quarter 2021 results, driven by diligent execution of operational plans and healthy growth dynamics backed by solid order trends. Adjusted earnings in the reported quarter surpassed the Zacks Consensus Estimate. In addition, Motorola achieved record sales, earnings and cash flow in 2021 despite supply chain headwinds, which further exemplified the strength of its product portfolio.
Net Earnings
On a GAAP basis, net earnings in the reported quarter were $401 million or $2.30 per share compared with $412 million or $2.37 per share in the year-earlier quarter. The year-over-year decline, despite top-line growth, was primarily attributable to higher operating expenses.
Excluding non-recurring items, non-GAAP earnings in the quarter were $2.85 per share compared with $2.86 in the year-ago quarter. The bottom line beat the Zacks Consensus Estimate by 11 cents.
In 2021, Motorola recorded GAAP earnings of $1,245 million or $7.17 per share compared with $949 million or $5.45 per share in 2020, primarily driven by higher sales. Non-GAAP earnings were record high at $9.15 per share compared with $7.69 in 2020.
Revenues
Quarterly net sales were $2,320 million, up 2.1% year over year due to higher global demand driven by the strength of its business model and the value of its mission-critical integrated ecosystem. The company witnessed strong demand for video security, command center software and LMR (land mobile radio) services, while that for professional and commercial radio (PCR) was down due to supply-chain constraints. The top line missed the consensus estimate of $2,329 million. In 2021, Motorola recorded net sales of $8,171 million compared with $7,414 million in 2020, with growth across both the segments and all regions. Region-wise, quarterly revenues were up 4.3% in North America to $1,615 million due to growth in LMR and video security products. International revenues were down 2.8% to $705 million due to lower sales of LMR, partially offset by growth in video security products and command center software.
Segmental Performance
Net sales from Products and Systems Integration decreased to $1,495 million from $1,510 million in the year-ago quarter, as higher demand for LMR and video security solutions was more than offset by a decline in PCR owing to supply chain woes. The segment’s backlog was up $886 million to $4 billion, primarily due to high LMR demand in North America and the International markets.
Net sales from Software and Services were up 8.1% to $825 million with solid performance across command center software and services along with growth in LMR services. The segment’s backlog increased $1.3 billion to $9.6 billion, primarily due to multi-year software and service agreements in the Americas and the extension of the Airwave contract.
Other Quarterly Details
GAAP operating earnings decreased to $549 million from $555 million in the prior-year quarter, while non-GAAP operating earnings remained relatively flat at $670 million. The company ended the quarter with a record backlog of $13.6 billion, up $2.2 billion year over year.
Overall GAAP operating margin was 23.7%, down from 24.4%, while non-GAAP operating margin was 28.9% compared with 29.3% in the year-ago quarter. The decrease in both GAAP and non-GAAP operating margins was due to higher operating expenses, partially offset by improved operating leverage in Software and Services segment.
Non-GAAP operating earnings for Products and Systems Integration were down 7.3% to $378 million for a margin of 25.3%. Non-GAAP operating earnings for Software and Services were $292 million, up 12.7% year over year, driven by gross margin expansion and higher sales, led by strong demand for command center software solutions and continued growth in the services business. This resulted in non-GAAP operating margin of 35.4% for the segment, up from 33.9%.
Cash Flow and Liquidity
Motorola generated record $1,837 million of cash from operating activities in 2021 compared with $1,613 million a year ago. Free cash flow in 2021 was $1,594 million. The company repurchased $119 million worth of stock during the fourth quarter. As of Dec 31, 2021, the company had $1,874 million of cash and cash equivalents with $5,688 million of long-term debt compared with respective tallies of $1,254 million and $5,163 million in the prior year.
Guidance
With solid quarterly results and robust demand patterns, the company offered bullish guidance for 2022. Non-GAAP earnings for 2022 are expected in the $9.80-$9.95 per share range on year-over-year revenue improvement of 7% with a rise in both the segments on higher demand. For first-quarter 2022, non-GAAP earnings are expected in the $1.53-$1.59 per share range on year-over-year revenue improvement of 3% on healthy demand trends.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended downward during the past month.
The consensus estimate has shifted -19.01% due to these changes.
VGM Scores
At this time, Motorola has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. Following the exact same course, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Motorola has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Motorola Solutions, Inc. (MSI) : Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research
