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Zebra Technologies Corporation ZBRA has failed to impress investors with its recent operational performance due to tough end-market conditions and other challenges, which are likely to hurt its earnings in the near term.
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The currently Zacks Rank #4 (Sell) player has a market capitalization of 17.6 billion. In the past three months, the stock has lost 12.3% compared with the industry’s decline of 8.5%.
Let’s discuss the factors that might continue taking a toll on the firm.
Soft End-Market Conditions: Persistent softness in Zebra’s printing end market on account of the supply-chain challenges adversely impacted its Asset Intelligence & Tracking (AIT) segment. In first-quarter 2022, sales from its AIT segment declined 8.2% year over year. Supply-chain woes will likely affect ZBRA’s revenues in the quarters ahead.
High Costs and Expenses: ZBRA has been dealing with the adverse impacts of increasing cost of sales and operating expenses. In first-quarter 2022, its cost of sales increased 14.9% year over year to $795 million while the total operating expenses increased 11% on a year-over-year basis. Also, in the quarter, Zebra’s net income margin declined 260 basis points year over year. Challenges related to high freight costs might affect ZBRA’s margins and profitability in the quarters ahead.
Elevated Debt Load: ZBRA’s profitability can be hurt by a highly leveraged balance sheet. Zebra’s total debt remained high at $1,101 million, while exiting the first quarter of 2022. Zebra’s cash and cash equivalents of $141 million seem unimpressive considering its heavy debt load.
Unfavorable Forex: Given its widespread presence in the international markets, Zebra’s performance is exposed to risks arising from geopolitical tensions, trade relations and adverse movements in foreign currencies. Forex woes hampered ZBRA’s sales by 0.1% on a year-over-year basis in the first quarter of 2022. The performance of its overseas business might be depressed by a stronger U.S. dollar in the quarters ahead.
Southbound Estimate Trend: In the past 60 days, the Zacks Consensus Estimate for ZBRA’s second-quarter 2022 earnings has declined from $4.68 to $4.19 on three downward estimate revisions against none upward. Over the same time frame, the consensus estimate for 2022 earnings has decreased from $19.77 to $18.97 on three downward estimate revisions against none upward.
Zacks Rank & Stocks to Consider
Some better-ranked companies from the industrial products sector are discussed below:
Applied Industrial Technologies, Inc. AIT presently sports a Zacks Rank #1. AIT delivered a trailing four-quarter earnings surprise of 25.4%, on average. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
AIT’s earnings estimates have increased 5.9% for fiscal 2022 (ending June 2022) in the past 60 days. Its shares have rallied 5.5% in the past three months.
Roper Technologies, Inc. ROP presently has a Zacks Rank #2 (Buy). Its earnings surprise in the last four quarters was 2%, on average.
In the past 60 days, ROP’s earnings estimates have increased 1.2% for 2022. The stock has dipped 2.9% in the past three months.
IDEX Corporation IEX is presently Zacks #2 Ranked. IEX’s earnings surprise in the last four quarters was 2.8%, on average.
In the past 60 days, the stock’s earnings estimates have increased 3.5% for 2022. The stock has gained 3.6% in the past three months.
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Applied Industrial Technologies, Inc. (AIT) : Free Stock Analysis Report
IDEX Corporation (IEX) : Free Stock Analysis Report
Zebra Technologies Corporation (ZBRA) : Free Stock Analysis Report
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