Zebra Technologies (ZBRA) Q2 Earnings Beat, '23 View Bearish
Zebra Technologies Corporation ZBRA reported second-quarter 2023 adjusted earnings (excluding 46 cents from non-recurring items) of $3.24 per share, beating the Zacks Consensus Estimate of earnings of $2.91 per share. The bottom line fell 23.2% year over year.
Total revenues of $1,214 million missed the Zacks Consensus Estimate of $1,311.1 million. The top line plunged 17.3% year over year due to softening demand and reduced consumer spending, the impact of which was more prominent in the retail and logistics end markets. The company has announced incremental $65 million of annualized expense reductions to combat the end-market softness. This, coupled with the prior cost-reduction plan, is expected to generate cost savings of approximately $85 million annually for ZBRA.
Consolidated organic net sales declined 16% year over year. Acquisitions contributed 0.6% to the top line, while foreign-currency translation had an adverse impact of 1.9% on sales.
Zebra Technologies Corporation Price, Consensus and EPS Surprise
Zebra Technologies Corporation price-consensus-eps-surprise-chart | Zebra Technologies Corporation Quote
Segmental Performance
Revenues from the Asset Intelligence & Tracking segment were $459 million, down 1.7% year over year. Organic net sales increased 0.2% in the AIT segment. Foreign-currency translation hurt segmental revenues by 1.9%.
The Enterprise Visibility & Mobility segment’s revenues were $755 million, down 24.6% year over year. Organic net sales declined 23.6%. Acquisitions contributed 0.9% to segmental revenues, while foreign-currency translations hurt revenues by 1.9%.
Margin Profile
In the second quarter, Zebra Technologies’ cost of sales totaled $633 million, down 20.3% year over year. Total operating expenses declined 52.7% year over year to $387 million.
ZBRA reported a net income of $144 million in the second quarter against a net loss of $98 million in the year-ago period.
Balance Sheet and Cash Flow
Exiting the second quarter, Zebra Technologies had cash and cash equivalents of $68 million compared with $105 million at the end of December 2022. Long-term debt was $2,042 million compared with $1,809 million at the end of December 2022.
In the first six months of 2023, Zebra Technologies used net cash of $110 million in operating activities against $154 million in cash generated at the end of the year-ago period. In the same period, the company incurred capital expenditure of $34 million. Free cash outflow was negative $144 million. The company repurchased shares worth $52 million in the first half of 2023.
Q3 Guidance
For the third quarter of 2023, Zebra Technologies expects a 30-35% drop in net sales from the year-ago reported quarter. This includes a one percentage point negative impact from foreign currency headwind. Adjusted EBITDA margin is expected to be 10-12%. Adjusted earnings are estimated to be between 60 cents and $1. The Zacks Consensus Estimate for the same stands at $4 per share. Adjusted effective tax rate is predicted to be approximately 18%.
2023 Guidance
For 2023, Zebra Technologies, carrying a Zacks Rank #3 (Hold), expects net sales to decline 20-23% from the year-ago period. This includes more than 1 percentage point negative impact from adverse foreign currency movement and a 50-basis point contribution from acquisitions. Adjusted EBITDA margin is estimated to be approximately 18%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks.
While ZBRA expects free cash flow to be positive in the second half, it expects the same to be negative for the full year due to lower profitability, elevated inventory and higher cash taxes (including an anticipated $180 million in previously-announced settlement payments).
Performance of Other Industrial Companies
A. O. Smith Corporation’s AOS second-quarter 2023 adjusted earnings (excluding 3 cents from non-recurring items) of $1.01 per share surpassed the Zacks Consensus Estimate of adjusted earnings of 91 cents per share. The bottom line jumped 23.2% year over year.
A. O. Smith’s net sales of $960.8 million underperformed the consensus estimate of $971 million. The top line dipped 0.5% year over year.
Allegion plc’s ALLE second-quarter 2023 adjusted earnings of $1.76 per share surpassed the Zacks Consensus Estimate of $1.69. The bottom line increased 28.5% year over year.
Allegion’s revenues of $912.5 million missed the Zacks Consensus Estimate of $927 million. However, the top line jumped 18% from the year-ago quarter.
IDEX Corporation’s IEX second-quarter 2023 adjusted earnings of $2.18 per share surpassed the Zacks Consensus Estimate of adjusted earnings of $2.12 per share. On a year-over-year basis, the bottom line increased 7.9%.
IDEX’s net sales of $846.2 million underperformed the Zacks Consensus Estimate of $847 million. However, the top line increased 6.3% year over year. Organic sales in the quarter increased 3% year over year.
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