Before the opening bell,
Motorola Solutions Inc.
) reported impressive financial results for the third quarter of
2012, with both top and bottom lines surpassing the Zacks
Third-Quarter Results in Details
Quarterly GAAP net income from continuing operation was $206
million or 72 cents per share compared with $128 million or 45
cents per share in the prior-year quarter.
Adjusted EPS of 84 cents in the quarter was much higher than
the Zacks Consensus Estimate of 61 cents. Quarterly total revenue
of $2,153 million was up 3% year over year, and also above the
Zacks Consensus Estimate of $2,146 million. The growth in revenue
was mainly fueled by higher global demand across the Government
Quarterly gross margin was 50.5% compared with 50.6% in the
prior-year quarter. Operating income in the reported quarter was
$324 million, up 28% year over year. Quarterly operating margin
was 15% versus 12.2% in the prior-year quarter. During the second
quarter of 2012, Motorola Solutions repurchased shares worth $308
During the quarter, Motorola Solutions generated $182 million
in cash from operations compared with $477 million in the
year-ago quarter. Quarterly free cash flow (operating cash flow
less capital expenditure) was $143 million compared with $434
million in the prior-year quarter.
At the end of third quarter 2012, Motorola Solutions had
$3,539 million in cash, cash equivalents and marketable
securities compared with $5,091 million at the end of fiscal
2011. Total debt at the end of the quarter was $1,860 million
compared with $1,130 million at the end of fiscal 2011.
Debt-to-capitalization ratio at the end of the reported quarter
was 0.32 compared with 0.18 at the end of fiscal 2011.
Quarterly total revenue was $1,521 million, up 12% year over
year. Operating income came in at $273 million, up by a
significant 47% year over year.
Quarterly total revenue was $632 million, down 13% year over
year. Operating income stood at $51 million, down 25% year over
Performance by Category
Quarterly product revenue was $1,567 million, up 1% year over
year. Services revenue was $586 million, up 9.9% year over year.
Quarterly product gross margin was 56.5% compared with 56.3% in
the year-ago quarter. Services gross margin was 34.5% compared
with 34.1% in the year-ago quarter.
Future Financial Outlook
Motorola Solutions expects fourth-quarter 2012 revenue to grow
between 6% to 7% year over year. EPS from continuing operation is
expected in the range of 98 cents to $1.03. For fiscal 2012,
revenue is expected to grow 6% to 6.5% year over year (inclusive
of recently acquired Psion revenue).
We believe that huge market share for public safety products,
recent acquisition and continuous order wins will consistently
drive both top and bottom line of the company going forward.
However, the company is heavily dependent on government
expenditures for its revenue. Approximately 65% of total sales of
Motorola Solutions are from government agencies. Therefore, we
believe that a slowdown in the government expenditures owing to
budgetary pressures may significantly jeopardize the company's
Sprint Nextel Corp
) has planned to gradually phase-out of iDEN network, which may
act as a major setback for the company going forward. Thus, we
maintain our long-term Neutral recommendation on Motorola
Currently, Motorola Solutions Inc. has a Zacks #2 Rank,
implying a short-term Buy rating on the stock.
MOTOROLA SOLUTN (MSI): Free Stock Analysis
SPRINT NEXTEL (S): Free Stock Analysis Report
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