Motorola Solutions Inc
. (
MSI
) is scheduled to release its fourth quarter 2011 results on
Wednesday, January 25, before the closing bell. The current Zacks
Consensus Estimate for the fourth quarter is pegged at 74 cents,
representing an annualized growth of negative 9.05%.
With respect to earnings surprises over the trailing four
quarters, Motorola Solutionshas outperformed the Zacks Consensus
Estimate in three of the last four quarters. The average earnings
surprise was a positive 25.01%, implying that the company has
outdone the Zacks Consensus Estimate by the same magnitude over the
same period.
Third Quarter Recap
On October 27, 2011, Motorola Solutionsreported its third
quarter 2011 financial results.
Quarterly total revenue was $2,105 million, up 10.3% year over
year and exceeded the Zacks Consensus Estimate of $2,091
million.
Quarterly GAAP net income from continuing operation was $253
million or 45 cents per share compared with $211 million or a loss
of 4 cents per share in the prior-year quarter. However, adjusted
(excluding special items) EPS in the third quarter of 2011 was 56
cents, surpassing the Zacks Consensus Estimate of 54 cents.
Quarterly gross margin was 50.4% compared with 50.5% in the
prior-year quarter. Quarterly operating margin came in at 12%
versus 11.1% in the prior-year quarter.
Agreement of Estimate Revisions
In the last 30 days, out of the six analysts covering the stock,
none increased or decreased their estimates for the fourth quarter
of 2011. Likewise, for the first quarter of fiscal 2012, out of the
five analysts, none of the analysts raised the estimates but one
analyst reduced the same for the period.
In the last 30 days, out of the six analysts covering the stock
for fiscal 2011 and fiscal 2012, none increased the estimates for
the period; however, one analyst slashed the EPS estimate for
fiscal 2012.
Magnitude of Estimate Revisions
During the last 30 days, the current Zacks Consensus Estimate
for the fourth quarter was in line with the previous estimate of 74
cents. For the first quarter of 2012, the current Zacks Consensus
Estimate was a penny short of the previous Zacks Consensus Estimate
of 45 cents. For fiscal 2011, the current Zacks Consensus Estimate
was at par with the previous estimate of $2.26. However, for 2012,
the current Zacks Consensus Estimates was 2 cents below the
previous Zacks Consensus Estimate of $2.57.
Earning Surprises
The current Zacks Consensus Estimates for the ongoing quarter
reflects a 0.00% upside potential while the first quarter of 2012
reflects a 15.56% downside risk (essentially a proxy for future
earning surprises). Similarly, fiscal 2011 contain a 0.00% growth
potential. However, 2012 has a downside potential of 12.55%.
Our Recommendation
Motorola Solutions continues to report solid financial results
with huge margin improvement. Furthermore, the company's business
model remains compelling and we believe that the company will be
able to maintain its current top-line growth going forward
primarily due to the critical nature of the public safety network
in the U.S. and massive growth potential in the Middle East.
However, the company is heavily dependent on government
expenditures for its revenue.Therefore, a slowdown in the
government expenditure due to budgetary pressures, particularly at
the state and local level, may significantly jeopardize the
company's overall financials. Moreover,the decision of
Sprint Nextel Corp.
(
S
) to gradually phase-out iDEN network is also a setback for the
company as Motorola Solutions was expecting huge top-line growth
from that project.We, thus, maintain our long-term Neutral
recommendation for Motorola Solutions Inc.
Currently, Motorola SolutionsInc. has a Zacks #4 Rank, implying
a short-term Sell rating.
MOTOROLA SOLUTN (
MSI
): Free Stock Analysis Report
SPRINT NEXTEL (
S
): Free Stock Analysis Report
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