Motorola Solutions Earnings: Share Buybacks And Airwave Shore Up Results And Near Term Future

In line with our expectations, Motorola Solutions’ revenues and earnings per share increased significantly in Q2 fiscal 2016, driven by incremental revenues from Airwave Solutions,  continued cost dicipline and a decrease in the share count. The results were able to beat market expectations comprehensively and the company’s shares are up a bit on the news.

Following the earnings announcement, the company reaffirmed its annual guidance of a 5% to 7% increase in revenues for the year. Additional  revenue and backlog from the Airwave acquisition and new contract wins are expected to drive the company’s growth. It must be noted that Airwave Solutions has played a crucial role in bolstering Motorola’s topline growth over the past couple of quarters. For instance, both product and services revenues for the company were down year over year in Q2 fiscal 2016, but $146 million from Airwave helped Motorola post positive topline growth. We expect this trend to persist going forward, at least for the near term. From a long term perspective, the company should benefit from a $2.2 billion year-over-year increase in order backlog (with $1.6 billion coming from Airwave) and from new contracts and investment in innovation, which in turn should help the company offset the major macroeconomic weakness responsible for its sluggish product and services sales.

From a bottomline perspective, strong cost controls and significant share buybacks are expected to buttress the company’s earnings per share going forward. During the second quarter, Motorola was able to lower its operating expenses by $31 million year over year, which resulted in an increase in operating margins. We expect the company to sustain such control over its operating expenses going forward. Furthermore, the company recently allocated another $2 billion to buybacks and it still has $400 million pending from its previous plan. With continous buyback activities, fewer numbers of shares outstanding will magnify the impact of increased operating income.

Have more questions about Motorola Solutions?  See the links below:

Notes:

• What’s Motorola Solutions’ Revenue And Net Income Breakdown In Terms Of Different Operating Segments?
• How Has Motorola’s Revenue & Cash Profit Composition Changed In The Last Four Years?
• By How Much Have Motorola Solutions’ Revenue and EBITDA Increased In The Last Five Years?

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