Before the opening bell,
Motorola Solutions Inc.
) reported mixed financial results for the second quarter of 2012,
with the bottom line missing the Zacks Consensus Estimate but the
top line surpassing the same.
Following the earning release, the company raised its cash
dividend by 18% to 26 cents per share and increased the existing
share repurchase authorization by $2 billion to $5 billion, thereby
boosting shareholders' value. Further, the company also lifted its
guidance for full fiscal 2012.
Second-Quarter Results in Details
Quarterly GAAP net income from continuing operation was $177
million or 60 cents per share compared with $50 million or 14 cents
per share in the prior-year quarter.
Adjusted EPS of 60 cents in the quarter was slightly below the
Zacks Consensus Estimate of 62 cents. Quarterly total revenue of
$2,148 million was up 8.3% year over year, and also above the Zacks
Consensus Estimate of $2,107 million. The growth in revenue was
mainly fueled by higher global demand across the Government
Quarterly gross margin was 49.3% compared with 50.1% in the
prior-year quarter. Operating income in the reported quarter was
$278 million, up 74.8% year over year. Quarterly operating margin
was 12.9% versus 8% in the prior-year quarter. During the second
quarter of 2012, Motorola Solutions repurchased shares worth $1,804
During the quarter, Motorola Solutions generated $254 million in
cash from operations compared with $94 million in the year-ago
quarter. Quarterly free cash flow was $202 million compared with
$61 million in the prior-year quarter.
At the end of second quarter 2012, Motorola Solutions had $3,705
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 $1,861 million compared with $1,130
million at the end of fiscal 2011. Debt-to-capitalization ratio at
the end of the reported quarter was 0.33 compared with 0.18 at the
end of fiscal 2011.
Quarterly total revenue was $1,459 million, up 14% year over
year. Operating income came in at $197 million, up 88% year over
Quarterly total revenue was $689 million, down 2% year over
year. Operating income stood at $81 million, up 50% year over
Performance by Category
Quarterly product revenue was $1,563 million, up 7.6% year over
year. Services revenue was $585 million, up 10.2% year over year.
Quarterly product gross margin was 54.4% compared with 55.6% in the
year-ago quarter. Services gross margin was 35.7% compared with
37.5% in the year-ago quarter.
Future Financial Outlook
Motorola Solutions expects third-quarter 2012 revenue to grow
approximately 3% year over year. EPS from continuing operation is
expected in the range of 69 cents to 74 cents. For fiscal 2012,
revenue is expected to grow 5% to 6% year over year and operating
income is estimated to be 17% of the total revenue.
Huge market share for public safety products and a massive $6
billion of order backlog coupled with an increase in the share
repurchase authorization will certainly boost the top and bottom
line of Motorola Solutions.
However, the company is heavily dependent on government
expenditures for its revenue. Approximately 65% of total sales of
Motorola Solutions are from government agencies.
So we believe that a slowdown in the government expenditures
owing to budgetary pressures may significantly jeopardize the
company's overall financials. Moreover,
Sprint Nextel Corp
) has planned to gradually phase-out of iDEN network may act as a
major setback for the company going forward. Thus, we maintain our
long-term Neutral recommendation on Motorola Solutions Inc.
Currently, Motorola Solutions Inc. has a Zacks #3 Rank, implying
a short-term Hold rating on the stock.
MOTOROLA SOLUTN (MSI): Free Stock Analysis
SPRINT NEXTEL (S): Free Stock Analysis Report
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