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Shares of Motorola Solutions, Inc. MSI have gained 31.8% in a year’s time, outperforming the Zacks Wireless Equipment industry’s rally of 13.5%.
Let’s take a look into the factors responsible for the impressive price performance and see if the company can add new feathers to its cap.
Last month, Motorola reported better-than-expected earnings per share and revenues in the fourth quarter of 2017. The metrics also increased on a year-over-year basis. Results were driven by the strong performance of its land and mobile radio operations.
In fact, the company's growth-by-acquisition strategy, which has broadened its product portfolio is encouraging. In sync with this objective, Motorola entered into an agreement with Avigilon to acquire the latter in an all-cash transaction. Per the agreement, Motorola will purchase all of Avigilon’s outstanding shares for CAD $27 per share.
Motorola’s efforts to reward its investors through dividend payments and buybacks are also impressive. Evidently, the company bought back shares worth $125 million and paid $76 million in dividends in the fourth quarter of 2017.
Moving ahead, we expect the company to perform well backed by its robust product portfolio and growth-oriented strategies. For example, the Avigilon buyout is expected to widen Motorola’s mission-critical communications technologies portfolio.
Furthermore, Motorola’s robust projections for first-quarter and full-year 2018 reflects a healthy picture. While revenues are anticipated to grow approximately 7%, adjusted earnings per share are projected between 83 cents and 88 cents in the first quarter of 2018. For 2018, the company expects the top line to improve roughly 5% while the bottom line is envisioned in the $6.50-$6.65 range.
The new tax law (Tax Cuts and Jobs Act), which reduces corporate tax rate significantly, is also a positive for the company. For 2018, effective tax rate is expected to come down to around 25% from 32.8% and 31% in fourth-quarter and full-year 2017, respectively.
Estimate Revisions & Style Score
Upward estimate revisions reflect optimism in a stock’s prospects. Motorola scores impressively on this front too. In fact, this Zacks Rank #2 (Buy) company has seen the Zacks Consensus Estimate for current-quarter and current-year earnings being revised 14.7% and 15.2% upward, respectively, in the last 60 days.
Additionally, the stock has a VGM Score of A. Here V stands for Value, G for Growth and M for Momentum and the score is a weighted combination of these three scores.
Such a score allows investors to eliminate the negative aspects of stocks and select winners. However, it is important to keep in mind that each Style Score will carry a different weight while arriving at a VGM Score.
Other Stocks to Consider
Investors interested in the broader Computer and Technology sector may also consider Harris Corporation HRS, Microsoft Corporation MSFT and Adobe Systems Incorporated ADBE. All these three stocks carry the same bullish rank as Motorola. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Harris has an impressive earnings track record, having surpassed the Zacks Consensus Estimate in three of the last four quarters, with an average beat of 6.7%.
Microsoft has an impressive earnings history, having surpassed the Zacks Consensus Estimate in each of the trailing four quarters, with an average beat of 18%.
Adobe Systems has an impressive earnings history, having surpassed the Zacks Consensus Estimate in each of the last four quarters, with an average beat of 9%.
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