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Can Top-Line Growth Drive Motorola's (MSI) Q3 Earnings?

Zacks Equity Research

Motorola Solutions, Inc. MSI is scheduled to report third-quarter 2019 results after the closing bell on Oct 30. In the last reported quarter, the company delivered a positive earnings surprise of 5.6%, surpassing the Zacks Consensus Estimate by 9 cents. For the third quarter, the company is likely to have generated higher consolidated revenues on a year-over-year basis, supported by healthy growth trajectory.

Factors at Play

During the quarter, Motorola acquired WatchGuard, Inc. — a leading provider of mobile video solutions for law enforcement — to boost its portfolio for mission-critical ecosystem. The buyout added new capabilities to its video security solutions portfolio, and is likely to have translated into incremental revenues for the third quarter.

At the same time, Motorola launched two new products, namely the Avigilon video for radio site security and the KVL 5000 key variable loader for secure communications, to keep networks secure against cybersecurity threats through customized risk assessments and round-the-clock security monitoring. This is likely to have boosted revenues for the Products & Systems Integration segment in the quarter. The Zacks Consensus Estimate for the segment revenues is pegged at $1,342 million, indicating a rise of 16.6% from the year-ago reported number.

The Services and Software segment has been another area of significant focus. During the third quarter, Motorola successfully integrated CommandCentral Aware software with Avigilon Blue – its cloud video security platform. The integration enables public safety agencies to better manage and monitor video feeds and camera networks through the latest software-as-a-service offering.

Despite this, the consensus estimate for Services and Software revenues is pegged at $641 million for the third quarter, indicating a decline from $711 million generated a year ago, largely due to adverse foreign currency effects.

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 have recorded healthy top-line growth. The Zacks Consensus Estimate for total revenues for the third quarter is pegged at $1,992 million. In the year-earlier quarter, it generated revenues of $1,862 million. The consensus estimate for earnings is currently pegged at $1.95 per share, up from $1.94 reported in the year-earlier quarter.

Earnings Whispers

Our proven model does not predict an earnings beat for Motorola in the third quarter. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. This is not the case here.

Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is 0.00% as both are pegged at $1.95 per share. 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.

Stocks to Consider

Here are some 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:

Viavi Solutions Inc. VIAV is set to release quarterly numbers on Oct 30. It has an Earnings ESP of +6.25% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Earnings ESP for Ubiquiti Inc. UI is +1.18% and it carries a Zacks Rank of 3. The company is set to report quarterly numbers on Nov 8.

The Earnings ESP for DHI Group, Inc. DHX is +9.09% and it carries a Zacks Rank of 3. The company is scheduled to report quarterly numbers on Nov 7.

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