Strong 1Q for Motorola Solutions - Analyst Blog

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Motorola Solutions Inc. ( MSI ) reported excellent financial results for the first quarter of 2012 with both the top line and bottom line exceeding the Zacks Consensus Estimates. The solid performance was mainly driven by improved demand across the Government segments.

First-Quarter Results in Details

Quarterly GAAP net income from continuing operation was $159 million or 50 cents per share compared with $367 million or $1.07 per share in the prior-year quarter. However, adjusted (excluding special items) EPS in the first quarter of 2012 stood at 53 cents, ahead of the Zacks Consensus Estimate of 47 cents.

Quarterly total revenue was $1,956 million, up 6.7% year over year, and marginally above the Zacks Consensus Estimate of $1,918 million.

Quarterly gross margin was 49.7% compared with 50.4% in the prior-year quarter. Operating income in the reported quarter was $232 million, up 37.3% year over year. Quarterly operating margin was 11.9% versus 9.2% in the prior-year quarter. During the first quarter of 2012, Motorola Solutions repurchased common shares worth $1,365 million.   

During the quarter, Motorola Solutions generated $69 million in cash from operations compared with $233 million in the year-ago quarter. Quarterly free cash flow was a negative $20 million compared with $206 million in the prior-year quarter.

At the end of first quarter of fiscal 2012, Motorola Solutions had $3,767 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 $1,126 million compared with $1,130 million at the end of fiscal 2011. Debt-to-capitalization ratio at the end of the reported quarter was 0.22 compared with 0.18 at the end of fiscal 2011.

Government Segment

Quarterly total revenue was $1,301 million, up 11% year over year. Operating income came in at $150 million, up 52% year over year.

Enterprise Segment

Quarterly total revenue was $655 million, down 2% year over year. Operating income stood at $82 million, up 17% year over year.

Performance by Category

Quarterly Product revenue was $1,444 million, up 5.1% year over year. Services revenue was $512 million, up 11.3% year over year. Quarterly Product gross margin was 54.4% compared with 54.6% in the year-ago quarter. Services gross margin was 36.5% compared with 37.8% in the year-ago quarter.

Future Financial Outlook

Motorola Solutions expects second-quarter 2012 revenue to grow by approximately 6% year over year. EPS from continuing operation is expected in the range of 65 cents to 70 cents. For fiscal 2012, revenue is expected to grow 5% year over year and operating income is estimated to be 17% of total revenue.  

Recommendation

Motorola Solutions is market leader in the lucrative U.S. Public Safety market.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.  

Furthermore, the company has struck a deal with Verizon Communication Inc. ( VZ ) to install a standard-based public safety broadband network for mission-critical operations leveraging on the nationwide LTE network of Verizon, which we believe will act as a positive catalyst for the stock going forward. We, thus, maintain our long-term Neutral recommendation on Motorola Solutions Inc. 

We maintain our long-term Outperform recommendation onMotorola SolutionsInc. Currently,Motorola Solutions Inc.has a Zacks #2 Rank, implying a short-term Buy rating on the stock.


 
MOTOROLA SOLUTN ( MSI ): Free Stock Analysis Report
 
VERIZON COMM ( VZ ): Free Stock Analysis Report
 
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Stocks

Referenced Stocks: MSI , VZ

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