Will Top-Line Woes Affect Motorola's (MSI) Q2 Earnings?
Motorola Solutions, Inc. MSI is scheduled to report second-quarter 2020 results after the closing bell on Aug 6. In the last reported quarter, the company delivered an earnings surprise of 19.2%, surpassing the Zacks Consensus Estimate by 24 cents. In the second quarter, the company is likely to have generated lower consolidated revenues on a year-over-year basis due to coronavirus-induced turmoil.
Factors at Play
During the second quarter, Motorola augmented mission-critical communications infrastructure with the launch of the TLK 150 Mobile Two-Way Radio that adheres to all security guidelines of the Federal Motor Carrier Safety Administration pertaining to driver safety and offers a perfect solution for the on-the-go workforce. The device is interoperable with land mobile radio, making it easier to communicate with an existing radio network and offers critical safety features like location tracking, emergency calling services and alerts for drivers along with crisp and clear audio features. Such innovative product launches and system deployments are likely to have translated into incremental revenues for the Products & Systems Integration segment.
The Services and Software segment has been another area of significant focus. The company rolled out three new cloud-based products — PremierOneCloud CAD, CommandCentral 9-1-1 Smart Transcription and CommandCentral 9-1-1 Citizen Input — to enable emergency call handlers to maintain authenticity of information in a secure government cloud environment, thereby reinforcing a dynamic and flexible work environment. However, a tough year-over-year comparison due to challenging macroeconomic conditions stemming from the virus outbreak is likely to have negated the software and service launches.
During the quarter, Motorola completed the acquisition of IndigoVision. Complementing its video portfolio, IndigoVision’s products will provide greater go-to-market reach across a broader customer base. This is likely to be reflected in the upcoming results.
Despite healthy demand across land mobile radio products and other devices, driven by a comprehensive suite of services that ensures continuity and reduces risks related to critical communications operations, Motorola is likely to have recorded top-line contraction. The Zacks Consensus Estimate for total revenues in the second quarter is pegged at $1,574 million. In the year-earlier quarter, it generated revenues of $1,860 million. The consensus mark for earnings is currently pegged at $1.20 per share, indicating a decline from $1.69 reported in the year-earlier quarter. During the first-quarter 2020 earnings release, management expected second-quarter 2020 non-GAAP earnings to be in the $1.18-$1.27 per share range on a year-over-year revenue decline of 14-17%.
Our proven model does not predict an earnings beat for Motorola this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. But this is not the case here.
Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is -1.99%, with the former being pegged at $1.18 and the latter at $1.20. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Motorola Solutions, Inc. Price and EPS Surprise
Zacks Rank: Motorola currently has a Zacks Rank #4 (Sell).
Stocks to Consider
Here are some companies you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this season:
Watts Water Technologies, Inc. WTS is set to release quarterly numbers on Aug 3. It has an Earnings ESP of +18.38% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Earnings ESP for InterDigital, Inc. IDCC is +4.28% and it carries a Zacks Rank of 3. The company is set to report quarterly numbers on Aug 6.
The Earnings ESP for Maxar Technologies Ltd. MAXR is +31.71% and it carries a Zacks Rank of 2. The company is scheduled to report quarterly numbers on Aug 5.
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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.