A month has gone by since the last earnings report for Axon Enterprise (AXON Quick QuoteAXON - Free Report) . Shares have added about 2.1% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Axon due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Axon Enterprise Q4 Earnings & Revenues Top Estimates

Axon Enterprise reported fourth-quarter 2023 adjusted earnings of $1.12 per share, surpassing the Zacks Consensus Estimate of 86 cents. The bottom line increased 60% year over year despite a significant rise in cost of sales.

Total revenues of $432.1 million outperformed the Zacks Consensus Estimate of $419 million and increased 28.6% year over year. The top line benefited from strength in Axon Cloud software, demand for Axon Fleet systems, and the ramp-up of TASER 10 and Axon Body 4. In 2023, the company shipped more than 50,000 units of TASER 10 and the product became the highest selling TASER device in the fourth quarter.

Annual recurring revenues ascended 47.4% year over year to $697 million in the fourth quarter. The upside was due to strong sales of premium software bundles and connected devices. Net revenue retention was 122% in the period.

Total operating expenses climbed 20.8% year over year to $221.1 million in the quarter. Gross margin declined to 61.1% from 61.2% in the year-ago period.

For 2023, AXON’s adjusted earnings came in at $4.14, up 89% year over year. The company generated revenues of $1.56 billion, marking an increase of 31% year over year.

Segmental Details in Q4

Software & Sensors: Within this segment, Axon’s Cloud and Services revenues rose 44.1% to $163.6 million. The uptick was driven by strong demand for premium add-on features related to Axon Evidence, Axon Fleet Systems, and real-time operations and productivity software. Axon Cloud’s gross margin deteriorated to 74.6% from 75.5% in the year-ago period due to an increase in professional services costs related to Axon Fleet Systems’ installations.

Sensors & Other revenues climbed 24.8% to $107.2 million driven by strong demand for Axon body cameras and accessories, primarily due to growing popularity of Axon Body 4. Gross margin improved to 46.3% from 41.5% in the year-ago period supported by scale efficiencies on fixed costs and mix toward premium products.

TASER: The segment’s revenues jumped 18% year over year to $161.3 million, given continued ramp-up of the TASER 10 platform. Demand for TASER 7 declined in the quarter, partly affecting the segment’s performance.

Balance Sheet & Cash Flow

At the end of the fourth quarter, Axon had cash and cash equivalents of $598.5 million compared with $353.7 million at December 2022-end. Long-term lease liabilities totaled $33.6 million compared with $37.1 million at 2022-end.

In 2023, AXON generated net cash of $189.3 million from operating activities compared with $235.4 million a year ago.

Adjusted free cash flow was $148.1 million in 2023 compared with $197 million in the prior year.

Outlook

For 2024, Axon Enterprise expects revenues in the range of $1.88-$1.94 billion, indicating growth of approximately 20-24% year over year. Adjusted EBITDA is expected to be approximately $410-$430 million with a continued margin expansion from 2023.

For 2024, the company expects capital expenditures to be between $60 million and $75 million. This includes investments in TASER 10 automation and capacity expansion. It anticipates stock-based compensation expenses in the range of $205-$220 million for the year.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended upward during the past month.

VGM Scores

Currently, Axon has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. Following the exact same course, the stock was allocated a grade of F on the value side, putting it in the bottom 20% quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Axon has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

Axon is part of the Zacks Security and Safety Services industry. Over the past month, Allegion (ALLE Quick QuoteALLE - Free Report) , a stock from the same industry, has gained 4.7%. The company reported its results for the quarter ended December 2023 more than a month ago.

Allegion reported revenues of $897.4 million in the last reported quarter, representing a year-over-year change of +4.2%. EPS of $1.68 for the same period compares with $1.60 a year ago.

For the current quarter, Allegion is expected to post earnings of $1.50 per share, indicating a change of -5.1% from the year-ago quarter. The Zacks Consensus Estimate has changed +4.2% over the last 30 days.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Allegion. Also, the stock has a VGM Score of C.