Zebra (ZBRA) Up 19.5% Since Last Earnings Report: Can It Continue?
A month has gone by since the last earnings report for Zebra Technologies (ZBRA). Shares have added about 19.5% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Zebra due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Zebra Technologies Q3 Earnings Beat, Revenues Fall Y/Y
Zebra Technologies Corporation reported third-quarter 2023 adjusted earnings of 87 cents per share, which beat the Zacks Consensus Estimate of 76 cents. The bottom-line slumped year over year.
Total revenues of $956 million surpassed the Zacks Consensus Estimate of $917.5 million. The top line plunged 30.6% year over year due to softness across end markets and elongated sales cycles across product categories.
Consolidated organic net sales declined 29.6% year over year. Foreign-currency translation had an adverse impact of 1% on sales.
Segmental Performance
Revenues from the Asset Intelligence & Tracking (AIT) segment declined 26.7% year over year to $324 million. The Zacks Consensus Estimate was pegged at $419 million. Organic net sales decreased 25.8% in the AIT segment. Foreign-currency translation hurt segmental revenues by 0.9%.
The Enterprise Visibility & Mobility segment’s revenues were $632 million, down 32.5% year over year. The Zacks Consensus Estimate was pegged at $510 million. Organic net sales declined 31.4%. Foreign-currency translations hurt revenues by 1.1%.
Margin Profile
In third-quarter 2023, Zebra Technologies’ cost of sales totaled $529 million, down 29.5% year over year. Total operating expenses increased 3.1% year over year to $439 million.
ZBRA incurred a net loss of $15 million in the third quarter against a net income of $170 million in the year-ago period.
Balance Sheet and Cash Flow
Exiting the third quarter, Zebra Technologies had cash and cash equivalents of $61 million compared with $105 million at the end of December 2022. Long-term debt was $2,121 million compared with $1,809 million at the end of December 2022.
In the first nine months of 2023, Zebra Technologies used net cash of $145 million in operating activities against $221 million in cash generated at the end of the year-ago period. In the same period, the company incurred capital expenditure of $48 million. Free cash was negative $193 million in the reported quarter compared with positive $170 million in the year-ago period. The company repurchased shares worth $52 million in the first nine months of 2023.
Guidance
For the fourth quarter of 2023, Zebra Technologies expects net sales to decline 32-36% year over year. Adjusted EBITDA margin is expected to be approximately 16% for the quarter. Adjusted earnings per share are expected to be $1.40-$1.80 for the said period. The mid-point of the guided range — $1.60 — lies above the Zacks Consensus Estimate of $1.50. Adjusted effective tax rate is expected to be approximately 17%.
While free cash flow is expected to be positive in the second half of 2023, it is expected to be negative for the full year.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended upward during the past month.
The consensus estimate has shifted -9.79% due to these changes.
VGM Scores
Currently, Zebra has a poor Growth Score of F, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Zebra has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Zebra is part of the Zacks Manufacturing - Thermal Products industry. Over the past month, Pentair plc (PNR), a stock from the same industry, has gained 8.2%. The company reported its results for the quarter ended September 2023 more than a month ago.
Pentair plc reported revenues of $1.01 billion in the last reported quarter, representing a year-over-year change of -4.4%. EPS of $0.94 for the same period compares with $0.99 a year ago.
For the current quarter, Pentair plc is expected to post earnings of $0.85 per share, indicating a change of +3.7% from the year-ago quarter. The Zacks Consensus Estimate has changed -0.2% over the last 30 days.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Pentair plc. Also, the stock has a VGM Score of F.
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Zebra Technologies Corporation (ZBRA) : Free Stock Analysis Report
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