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Motorola (MSI) Q3 Earnings Beat, View Up on Record Revenues
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Motorola Solutions, Inc. (MSI - Free Report) reported strong third-quarter 2022 results, driven by the diligent execution of operational plans and healthy growth dynamics backed by solid order trends. Both adjusted earnings and revenues surpassed the respective Zacks Consensus Estimate. In addition, Motorola achieved record third-quarter sales and a quarter-ending backlog despite supply chain headwinds, which further exemplified the strength of its portfolio. The company expects this growth momentum to continue in the impending quarters and raised its guidance for 2022.
Net Earnings
On a GAAP basis, net earnings in third-quarter 2022 were $279 million or $1.63 per share compared with $307 million or $1.76 per share in the year-earlier quarter. The year-over-year decline despite top-line growth was primarily attributable to higher cost of sales in the reported quarter.
Excluding non-recurring items, non-GAAP earnings in the quarter were $514 million or $3.00 per share compared with $408 million or $2.35 in the year-ago quarter. The bottom line beat the Zacks Consensus Estimate by 12 cents.
Motorola Solutions, Inc. Price, Consensus and EPS Surprise
Quarterly net sales were $2,373 million, up 12.6% year over year, with record sales in both segments due to growth in North America driven by the strength of its business model and the value of its mission-critical integrated ecosystem. The company witnessed strong demand for video security, command center software and LMR (land mobile radio) services. The top line beat the consensus estimate of $2,313 million.
Region-wise, quarterly revenues were up 16.4% in North America to $1,687 million due to growth in LMR, command center soft and video security products. International revenues were up 4.3% to $686 million, as growth in video security products, LMR and command center software was partially offset by adverse foreign currency impact. Acquisitions contributed $32 million to revenues while foreign exchange headwinds were $66 million.
Segmental Performance
Net sales from Products and Systems Integration increased to $1,529 million from $1,325 million in the year-ago quarter, driven by higher demand for LMR and video security solutions. The segment’s backlog was up $1.2 billion to $4.8 billion, primarily due to high LMR and video demand in North America and the International markets.
Net sales from Software and Services were up 7.9% to $844 million, with solid performance across command center software, LMR and video security services. The segment’s backlog increased $0.9 billion to $8.7 billion, primarily due to multi-year software and service agreements in the Americas and the extension of the Airwave contract.
Other Quarterly Details
GAAP operating earnings decreased to $373 million from $451 million in the prior-year quarter, while non-GAAP operating earnings were up to $676 million from $555 million a year ago. The company ended the quarter with a record third-quarter backlog of $13.5 billion, up $2.1 billion year over year.
Overall GAAP operating margin was 15.7%, down from 21.4%, while non-GAAP operating margin was 28.5% compared with 26.3% in the year-ago quarter. The decrease in GAAP operating margin was due to higher operating expenses owing to inflated direct material costs and acquisitions, partially offset by higher sales.
Non-GAAP operating earnings for Products and Systems Integration were up 37.4% to $375 million for a margin of 24.5%. Non-GAAP operating earnings for Software and Services were $301 million, up 6.7% year over year, for a non-GAAP operating margin of 35.7%.
Cash Flow and Liquidity
Motorola generated $550 million of cash from operating activities in the first nine months of 2022 compared with $1,134 million a year ago, driven primarily by higher working capital due to an increase in inventory, higher employee incentive payments and higher cash taxes. Free cash flow in the first nine months of 2022 was $367 million, down from $959 million. The company repurchased $94 million worth of stock during the third quarter. As of Oct 1, 2022, the company had $822 million of cash and cash equivalents with $6,012 million of long-term debt.
Guidance
With solid quarterly results and robust demand patterns, the company increased its earlier guidance for 2022. Non-GAAP earnings for 2022 are currently expected in the $10.17-$10.22 per share range, up from previous expectations of $10.03-$10.13, on year-over-year revenue improvement of 9.25-9.5% (up from 8% expected earlier), with a rise in both segments on higher demand.
For fourth-quarter 2022, non-GAAP earnings are expected in the $3.40-$3.45 per share range on year-over-year revenue improvement of 9% due to healthy demand trends.
Moving Forward
Motorola is poised to gain from disciplined capital deployment and a strong balance sheet position. The company expects to witness strong demand across LMR products, the video security portfolio, services and software while benefiting from a solid foundation.
Sierra Wireless has a long-term earnings growth expectation of 15% and delivered an earnings surprise of 229.9%, on average, in the trailing four quarters. Over the past year, the stock has gained 80.3%. Earnings estimates for the current year have moved up 4400% since October 2021. Sierra Wireless continues to launch innovative products for business-critical operations that require high security and optimum 5G performance.
InterDigital, Inc. (IDCC - Free Report) , sporting a Zacks Rank #1, is another key pick for investors. It has a long-term earnings growth expectation of 25% and delivered a stellar earnings surprise of 81.9%, on average, in the trailing four quarters.
InterDigital is focused on pursuing agreements with unlicensed customers in the handset and consumer electronics markets. The company aims to become a leading designer and developer of technology solutions and innovation for the mobile industry, IoT and allied technology areas. InterDigital’s global footprint, diversified product portfolio and ability to penetrate different markets are impressive.
Comtech Telecommunications Corp. (CMTL - Free Report) , sporting a Zacks Rank #1, is another key pick. Headquartered in Melville, NY, the company is a leading global provider of next-generation 911 emergency systems and secure wireless communications technologies to commercial and government customers.
Comtech’s key satellite earth station modems incorporate forward error correction and bandwidth compression technologies, which enable its customers to optimize their satellite networks by either reducing their satellite transponder lease costs or increasing data throughput. It holds leadership positions in the market for high-throughput modems used in cellular backhaul.
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Motorola (MSI) Q3 Earnings Beat, View Up on Record Revenues
Motorola Solutions, Inc. (MSI - Free Report) reported strong third-quarter 2022 results, driven by the diligent execution of operational plans and healthy growth dynamics backed by solid order trends. Both adjusted earnings and revenues surpassed the respective Zacks Consensus Estimate. In addition, Motorola achieved record third-quarter sales and a quarter-ending backlog despite supply chain headwinds, which further exemplified the strength of its portfolio. The company expects this growth momentum to continue in the impending quarters and raised its guidance for 2022.
Net Earnings
On a GAAP basis, net earnings in third-quarter 2022 were $279 million or $1.63 per share compared with $307 million or $1.76 per share in the year-earlier quarter. The year-over-year decline despite top-line growth was primarily attributable to higher cost of sales in the reported quarter.
Excluding non-recurring items, non-GAAP earnings in the quarter were $514 million or $3.00 per share compared with $408 million or $2.35 in the year-ago quarter. The bottom line beat the Zacks Consensus Estimate by 12 cents.
Motorola Solutions, Inc. Price, Consensus and EPS Surprise
Motorola Solutions, Inc. price-consensus-eps-surprise-chart | Motorola Solutions, Inc. Quote
Revenues
Quarterly net sales were $2,373 million, up 12.6% year over year, with record sales in both segments due to growth in North America driven by the strength of its business model and the value of its mission-critical integrated ecosystem. The company witnessed strong demand for video security, command center software and LMR (land mobile radio) services. The top line beat the consensus estimate of $2,313 million.
Region-wise, quarterly revenues were up 16.4% in North America to $1,687 million due to growth in LMR, command center soft and video security products. International revenues were up 4.3% to $686 million, as growth in video security products, LMR and command center software was partially offset by adverse foreign currency impact. Acquisitions contributed $32 million to revenues while foreign exchange headwinds were $66 million.
Segmental Performance
Net sales from Products and Systems Integration increased to $1,529 million from $1,325 million in the year-ago quarter, driven by higher demand for LMR and video security solutions. The segment’s backlog was up $1.2 billion to $4.8 billion, primarily due to high LMR and video demand in North America and the International markets.
Net sales from Software and Services were up 7.9% to $844 million, with solid performance across command center software, LMR and video security services. The segment’s backlog increased $0.9 billion to $8.7 billion, primarily due to multi-year software and service agreements in the Americas and the extension of the Airwave contract.
Other Quarterly Details
GAAP operating earnings decreased to $373 million from $451 million in the prior-year quarter, while non-GAAP operating earnings were up to $676 million from $555 million a year ago. The company ended the quarter with a record third-quarter backlog of $13.5 billion, up $2.1 billion year over year.
Overall GAAP operating margin was 15.7%, down from 21.4%, while non-GAAP operating margin was 28.5% compared with 26.3% in the year-ago quarter. The decrease in GAAP operating margin was due to higher operating expenses owing to inflated direct material costs and acquisitions, partially offset by higher sales.
Non-GAAP operating earnings for Products and Systems Integration were up 37.4% to $375 million for a margin of 24.5%. Non-GAAP operating earnings for Software and Services were $301 million, up 6.7% year over year, for a non-GAAP operating margin of 35.7%.
Cash Flow and Liquidity
Motorola generated $550 million of cash from operating activities in the first nine months of 2022 compared with $1,134 million a year ago, driven primarily by higher working capital due to an increase in inventory, higher employee incentive payments and higher cash taxes. Free cash flow in the first nine months of 2022 was $367 million, down from $959 million. The company repurchased $94 million worth of stock during the third quarter. As of Oct 1, 2022, the company had $822 million of cash and cash equivalents with $6,012 million of long-term debt.
Guidance
With solid quarterly results and robust demand patterns, the company increased its earlier guidance for 2022. Non-GAAP earnings for 2022 are currently expected in the $10.17-$10.22 per share range, up from previous expectations of $10.03-$10.13, on year-over-year revenue improvement of 9.25-9.5% (up from 8% expected earlier), with a rise in both segments on higher demand.
For fourth-quarter 2022, non-GAAP earnings are expected in the $3.40-$3.45 per share range on year-over-year revenue improvement of 9% due to healthy demand trends.
Moving Forward
Motorola is poised to gain from disciplined capital deployment and a strong balance sheet position. The company expects to witness strong demand across LMR products, the video security portfolio, services and software while benefiting from a solid foundation.
Motorola currently has a Zacks Rank #3 (Hold).
A better-ranked stock in the broader industry is Sierra Wireless, Inc. , carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Sierra Wireless has a long-term earnings growth expectation of 15% and delivered an earnings surprise of 229.9%, on average, in the trailing four quarters. Over the past year, the stock has gained 80.3%. Earnings estimates for the current year have moved up 4400% since October 2021. Sierra Wireless continues to launch innovative products for business-critical operations that require high security and optimum 5G performance.
InterDigital, Inc. (IDCC - Free Report) , sporting a Zacks Rank #1, is another key pick for investors. It has a long-term earnings growth expectation of 25% and delivered a stellar earnings surprise of 81.9%, on average, in the trailing four quarters.
InterDigital is focused on pursuing agreements with unlicensed customers in the handset and consumer electronics markets. The company aims to become a leading designer and developer of technology solutions and innovation for the mobile industry, IoT and allied technology areas. InterDigital’s global footprint, diversified product portfolio and ability to penetrate different markets are impressive.
Comtech Telecommunications Corp. (CMTL - Free Report) , sporting a Zacks Rank #1, is another key pick. Headquartered in Melville, NY, the company is a leading global provider of next-generation 911 emergency systems and secure wireless communications technologies to commercial and government customers.
Comtech’s key satellite earth station modems incorporate forward error correction and bandwidth compression technologies, which enable its customers to optimize their satellite networks by either reducing their satellite transponder lease costs or increasing data throughput. It holds leadership positions in the market for high-throughput modems used in cellular backhaul.