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Motorola (MSI) Outpaces Q1 Earnings & Revenue Estimates

Zacks Equity Research

Motorola Solutions, Inc. MSI started 2019 on a positive note with record first-quarter revenues, operating earnings and backlog, driven by strength in both segments and diligent execution of operational plans. The company remains well poised to continue its growth momentum throughout the year with healthy demand across its portfolio.  

Net Earnings

On GAAP basis, net earnings were $151 million or 86 cents per share compared with $117 million or 69 cents per share in the year-earlier quarter. The year-over-year improvement was primarily attributable to top-line growth.

Non-GAAP earnings per share were $1.28 compared with $1.10 in the year-ago quarter. The bottom line beat the Zacks Consensus Estimate by 13 cents.

Motorola Solutions, Inc. Price, Consensus and EPS Surprise


Motorola Solutions, Inc. Price, Consensus and EPS Surprise

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


Quarterly net sales were record high at $1,657 million compared with $1,468 million in the year-ago quarter, primarily driven by growth in both the segments. The top line exceeded the Zacks Consensus Estimate of $1,630 million.

Geographically, revenues improved 17% in the Americas to $1,165 million and 7% in EMEA (Europe, Middle East and Africa) to $363 million, while decreasing 5% in Asia Pacific to $129 million.

Segmental Performance

Net sales from Products and Systems Integration segment were $1,069 million compared with $952 million in the prior-year quarter, backed by acquisitions and growth in Americas and EMEA region. The segment’s backlog was down $104 million year over year primarily due to two large system deployments in the Middle East and Africa.

Net sales from Services and Software segment came in at $588 million compared with $516 million a year ago, with growth in the Americas and EMEA. The segment’s backlog increased $885 million year over year, primarily due to growth in the Americas and the Airwave contract extension through the end of 2022.

Other Quarter Details

GAAP operating earnings increased to $229 million from $171 million in the prior-year quarter, while non-GAAP operating earnings were $315 million, up 21%. The company ended the quarter with total backlog of $10.4 billion, up $781 million from the year-ago quarter.

Overall GAAP operating margin improved to 13.8% from 11.6% in the prior-year quarter, primarily due to higher revenues. Non-GAAP operating margin was 19% compared with 17.7% in the year-ago quarter.

Non-GAAP operating earnings for Products and Systems Integration were $147 million, up 18% year over year. Non-GAAP operating margin for the segment was 13.8%, up from 13.1% due to higher sales.

Non-GAAP operating earnings for Services and Software were $168 million, up 24% year over year driven by gross margin expansion and higher sales for non-GAAP operating margin of 28.6%, up from 26.2%.

Cash Flow and Liquidity

Motorola generated $251 million of cash from operating activities against cash utilization of $500 million a year ago. Free cash flow for the quarter was $185 million.

As of Mar 31, 2019, the company had $886 million of cash and cash equivalents with $5,287 million of long-term debt.


Owing to solid quarterly revenue and earnings growth, management reiterated its earlier guidance for 2019. Full-year non-GAAP earnings are anticipated to lie within the $7.55-$7.70 per share range on revenue growth of 6-7%.

Second-quarter 2019 non-GAAP earnings are expected to be in the $1.55-$1.60 per share range on revenue growth of 4-5%.

Moving Forward

Motorola remains poised to gain from robust organic growth, disciplined capital deployment and a favorable global macroeconomic environment. The company expects to record strong demand across land mobile radio products, services and software going forward while benefiting from a solid foundation. Furthermore, Motorola’s competitive position along with attractive portfolio for large addressable markets and healthy balance sheet augur well for future growth.

Zacks Rank and Stocks to Consider

Motorola currently has a Zacks Rank #3 (Hold). Some better-ranked stocks in the broader industry are Ericsson ERIC and PC-Tel Inc. PCTI, each sporting a Zacks Rank #1 (Strong Buy) and Juniper Networks Inc. JNPR carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Ericsson is currently trading at a forward P/E (F1) of 26.5x.

PC-Tel is currently trading at a forward P/E (F1) of 59.6x

Juniper has a long-term earnings growth expectation of 6.2%. It delivered a positive average earnings surprise of 15.4% in the trailing four quarters, beating estimates on each occasion.

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