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Will Top-Line Growth Buoy Motorola's (MSI) Q2 Earnings?

Zacks Equity Research

Motorola Solutions, Inc. MSI is scheduled to report second-quarter 2019 results after the closing bell on Aug 1. In the last reported quarter, the company delivered a positive earnings surprise of 11.3%. Notably, Motorola surpassed the Zacks Consensus Estimate for earnings in each of the last four quarters, the average beat being 9.1%.

For the second quarter, the company is likely to report higher consolidated revenues on a year-over-year basis, supported by healthy growth trajectory.

Factors to Consider

During the quarter, Motorola announced that its APX Project 25 (P25) two-way radios are available for Allegheny county’s public-safety communications system. The radios will form an integral part of Maryland FiRST (First Responder Radio System Team) – a statewide 700 MHz radio system built for first responders to communicate across agencies and state borders. The introduction of the two-way radio system has led to enhanced coverage and interoperability with first responders across the state, and is likely to generate additional second-quarter revenues.

Motorola has also secured a tender to provide the Israel Railways Company with an advanced push-to-talk over cellular communication solution, which will enhance operational efficiency and passenger safety.

With robust organic growth, disciplined capital deployment and favorable growth dynamics, the Products & Systems Integration segment is likely to record revenues of $1,205 million in the second quarter, up from $1,042 million reported a year ago.

The Services and Software segment has been another area of significant focus. During the quarter, Motorola was selected by the Victoria Police in Australia to deploy a new mobility managed service. The solution hinges on facilitating greater situational awareness, safety and productivity of the agency’s frontline officers. The application allows Victoria Police to meet a major goal within its BlueConnect program — Connecting police and the community through technology. In addition, Victoria Police is deploying Motorola’s high-resolution, cloud-based Automatic Number Plate Recognition technology for 220 of its highway patrol vehicles.

Despite this, the Services and Software segment is likely to record revenues of $641 million for the second quarter, down from $718 million generated a year ago.

With solid demand across land mobile radio products and other devices, driven by a comprehensive suite of services that ensures continuity and reduces risks related to critical communications operations, Motorola is likely to record healthy top-line growth. The Zacks Consensus Estimate for total revenues for the second quarter is pegged at $1,849 million. In the year-earlier quarter, it generated revenues of $1,760 million.

Earnings Whispers

Our proven model shows that Motorola is likely to beat earnings in the second quarter as it possesses 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 perfectly the case here as you will see below:

Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is +1.25% with the former pegged at $1.62 and the latter at $1.60. 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. This increases the predictive power of our model and a positive ESP makes us reasonably 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.
Other Stocks to Consider

Here are some other 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:

Ciena Corporation CIEN is set to release quarterly numbers on Aug 29. It has an Earnings ESP of +5.26% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Earnings ESP for Sprint Corporation S is +195.59% and it carries a Zacks Rank of 3. The company is set to report quarterly numbers on Aug 2.

The Earnings ESP for TELUS Corporation TU is +2.61% and it carries a Zacks Rank of 2. The company is slated to report quarterly numbers on Aug 2.

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