3 Reasons Motorola Solutions Inc Is Worth Your Attention (MSI)

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Motorola Solutions ( MSI ) suffered a rocky start to 2016, as shares slid initially, then regained that lost ground … only to lose it again. In February, though, the tide turned for MSI stock. In fact, Motorola Solutions gained more than 13% last week alone while the broader market barely budged.

Motorola Solutions, for those not familiar, provides communication infrastructure, devices, accessories, software and services to government (including public safety and first-responder agencies, municipalities and more) as well as enterprise customers in more than 100 countries.

Let's take a closer look at each.

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MSI Earnings Beat

On Monday, Motorola Solutions posted its fourth-quarter and full-year earnings results. While revenues declined for both periods - in the fourth quarter, for instance, the damage was worsened by strong dollar yet still shook out to a 5% decline on a constant currency basis - the company's strong earnings per share numbers speak to the success of Motorola's attempts to control costs and reduce its share count.

For starters, MSI managed to post EPS growth even in the wake of the revenue decline. In fact, earnings tallied $1.58 earnings per share for the quarter, beating the consensus estimate of $1.42 and growing 26% from last year's results of $1.25 EPS. Meanwhile, for the full year, EPS grew nearly 30%.

Those EPS results were bolstered by the fact that management returned $3.5 billion to shareholders, the majority through buybacks.

Airwave Acquisition

Last year, Motorola Solutions acquired a company called Airwave Solutions - the largest private operator of a public safety network in the world. As of last week, the acquisition is complete, and the expected impact is impressive. Management says the Airwave buy should impact EPS and free cash flow per share this year . And while revenue is still expected to decline in most segments, Airwave's is expected to expand to the tune of around $450 million in revenue.

This is promising because it once again speaks to management's active, forward-looking role. Already, cash flow has been improving for MSI. While cash flow was negative in 2014, the company posted operating cash flow of more than $1 billion and free cash flow of $830 million ($4.11 per share) in 2015, crediting that progress to "lower pension contributions, improved working capital and lower operating expenses." Airwave will be a nice cherry on top.

MSI Stock Valuation

The addition of Airwave is one reason the company's earnings estimates have been upped by analysts so dramatically of late, and thus a reason the stock remains a value despite the recent spike. A month ago, MSI stock was trading for $62.42 and analysts expected the company to earn $3.84 in 2016 - a reasonable multiple of 16.

Now shares are going for roughly $74 … but the consensus for 2016 EPS has jumped even more. Analysts see MSI earnings of $4.39 per share this year … leaving the stock at a slightly lower multiple despite its dramatic jump.

The Bottom Line: That's just a quick summary as to why investors have been cheering MSI stock higher; there are plenty of other highlights in the earnings report, too. The fact that the company's backlog grew by 12%, for instance, and the announcement of a strategic partnership with Silver Lake Partners (another forward-looking bit of news) just add to the bull case.

While the recent trajectory likely won't be sustainable, don't be surprised if MSI stock keeps chugging higher over the long-term. Management is proving its savviness … and you can bet it's just getting started.

Hilary Kramer is the editor of GameChangers , Breakout Stocks Under $10 , High Octane Trader , Absolute Capital Return and Value Authority . She is an accomplished investment specialist and market strategist with more than 25 years of experience in portfolio management, equity research, trading, and risk management. She has extensive expertise in global financial management, asset allocation, investment banking and private equity ventures, and is regularly sought after to provide her analysis on Bloomberg, CNBC, Fox Business Network and other media.

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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 Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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