Earnings Miss On The Cards For Motorola?

Motorola Solutions (NYSE: MSI) will release its Q4 and full-year 2019 results on Thursday, February 6. Trefis details expectations about the global communications provider in an interactive dashboard, parts of which we highlight below. We believe that Motorola will most likely fall short of the consensus earnings, as well as revenue estimates for FY19. Motorola’s revenues would have increased by 7.4% to $7.88 billion (slightly below the consensus estimate of $7.89 billion), driven by strong growth in its products and services segments. Also, the EPS figure should have increased to $7.70 driven by higher sales and gross margin, and a lower share count. However, our EPS estimate is slightly below the consensus estimate of $7.81 per share. Further, we believe that Motorola’s stock price is unlikely to change much after it announces earnings. Our forecast indicates that Motorola’s valuation is $171 a share, which is similar to the current market price.

Trefis shines the spotlight on key assumptions and data for Motorola, and our hypothesis lays out one possible set of expectations. You can chime in with your expectations for Motorola’s FY19 earnings in our interactive dashboard.

(1) Motorola’s revenues would have increased to $7.88 billion in 2019; slightly below consensus estimates

• Trefis estimates Motorola’s 2019 revenues to be $7.88 billion, slightly below the consensus estimate of $7.89 billion.
• Motorola has achieved steady growth since 2016, adding well over $1.3 billion in total revenue since 2016 at an average annual rate of 10.3% driven by growth across all operating segments.
• We expect this trend to have continued in 2019 as strong performance in its Product division led by higher land mobile radio (LMR) sales coupled with incremental revenues from recent acquisitions would have helped the company add well over $545 million to the top line.
• Moreover, Motorola’s Services and Software revenues have been expanding driven by the company’s end-to-end offerings such as the command center and its growing installed base of systems.
• Services division is likely to have added $300 million to total revenues in 2019, with the Software business accounting for a bulk of the growth.
• For FY 2020, we expect Motorola to witness a growth of 6% led by steady growth across all the operating divisions.

Our interactive dashboard analysis, ‘How Does Motorola Solution Make Money?‘, provides an in-depth view of the company’s revenues along with our forecasts and a comparison of trends with peers Harris and Airbus.

(2) EPS is likely to increase by 7.7 % from $7.28 in 2018 to $7.70 in 2019, which is lower than the consensus estimate

• Motorola’s 2019 earnings per share (EPS) are expected to be $7.70 per Trefis analysis, 1.4% below the consensus estimate of $7.81 per share.
• An expected increase in revenues coupled with the lower share count should boost the EPS figure despite an expected increase in expenses by 8.3%.
• As we forecast Motorola’s expenses to grow at a faster rate than revenues in 2019 (8.3% vs. 7.5%), this will result in a 60-basis point reduction in Motorola’s adjusted Net Income Margin figure from 16.7% in 2018 to 16.1% in 2019.
• For 2020, we believe that a similar growth in revenues and expenses will result in the adjusted net income margin figure remaining around 16%.

 (3) Stock price estimate around the current market price

• A trailing P/E multiple of 22.2x looks appropriate for Motorola’s stock, which is higher than the current implied P/E multiple of 21.6x
• Trefis’ forecast for Motorola’s 2019 earnings is slightly behind the market expectations, however, P/E multiple is ahead of the market estimate – working out to a fair value of $171 for Motorola’s stock which is around the current market price of ~$168.

Additionally, you can input your estimates for Motorola’s key metrics in our interactive dashboard for Motorola’s pre-earnings, and see how that will affect the company’s stock price.

See all Trefis Price Estimates and Download Trefis Data here

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