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Zebra (ZBRA) to Gain From Solid Product Demand & Acquired Assets

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·3 min read
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Zebra Technologies Corporation ZBRA is well poised for growth courtesy of strong demand for its products, focus on product developments, acquisitions and a sound capital-deployment strategy.

The Zacks Rank #2 (Buy) company has a market capitalization of $31.5 billion. In the past three months, the stock has appreciated 16.3% compared with the industry’s growth of 12.3%.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

Let’s delve into the factors that make the company a smart investment choice at the moment.

Business Strength: Zebra is witnessing a robust demand environment for its products and solutions, as evident from year-over-year growth of 44% in its net sales in the second quarter of 2021. Healthy demand for the company’s printing and supplies, enterprise mobile computing, RFID product lines, as well as services and software is likely to drive its top-line in the coming quarters. The growing popularity of its Enterprise Asset Intelligence solutions, supported by its product developments initiatives, will likely be beneficial. For third-quarter 2021, it anticipates adjusted net sales to grow 21-25% on a year-over-year basis.

Benefits From Acquired Assets: In August 2021, the company announced plans to acquire antuit.ai, a provider of artificial intelligence-driven Software-as-a-Service solutions. The acquisition will complement the planning and demand forecasting module of Zebra’s retail software portfolio. Its acquisition of Reflexis Systems, Inc. (September 2020) has also strengthened its software offerings across retail and other key markets. In the first quarter and the second quarter of 2021, buyouts contributed 1.4% and 1.6% to its net sales, respectively.

Solid Cash Flow & Capital Allocation Strategy: Healthy cash flow enables the company to invest in organic growth, acquire businesses and repurchase shares. In the first six months of 2021, it generated free cash flow of $514 million, reflecting an increase of 59.6% year over year. For 2021, it expects free cash flow to be at least $900 million. In the first half of 2021, it used $25 million for share buybacks. Exiting the second quarter, $728 million worth of shares under the company’s buyback program was left for repurchase. In the first half of this year, it made debt repayments of $256 million.

Estimate Revisions: In the past 30 days, the Zacks Consensus Estimate for Zebra’s 2021 earnings has trended up from $16.94 to $17.43 on three upward estimate revisions against none downward. The consensus estimate for 2022 earnings has increased from $18.36 to $18.43 on two upward estimate revisions against one downward.

Other Key Picks

Some other top-ranked stocks from the Zacks Industrial Products sector are Kadant Inc KAI, John Bean Technologies Corporation JBT and EnPro Industries, Inc. NPO. While Kadant sports a Zacks Rank #1 (Strong Buy), John Bean Technologies and EnPro carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Kadant pulled off an earnings surprise of 22.26%, on average, in the trailing four quarters.

John Bean Technologies pulled off an earnings surprise of 16.85%, on average, in the trailing four quarters.

EnPro pulled off an earnings surprise of 80.64%, on average, in the trailing four quarters.


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