What’s Happening With Motorola Solutions Stock?

MSI: Motorola Solutions logo
Motorola Solutions

Motorola Solutions Inc. (NYSE: MSI) – one of the largest suppliers of land-mobile-radio (LMR) solutions – has seen its stock outperform. The stock remains up by about 4% year-to-date, while it has gained about 16% over the last 12 months. This compares to the S&P 500 which remains down by 10% over the past 12 months. So what’s driving the outperformance?

Demand for MSI’s products has been strong despite a broader slowdown in the economy. Over Q4 2022, the most recently reported quarter, MSI saw revenue beat estimates, growing by almost 17% year-over-year to $2.7 billion, driven primarily by higher land mobile radio (LMR) and video security and access control sales. Adjusted earnings also jumped by 26% to $3.60 per share. Moreover, Wall Street has also been quite positive on the stock, while macro tailwinds such as slower interest rate hikes by the Fed and signs of cooling inflation also appear to have helped. For 2023, Motorola Solutions is projecting revenues in the range of $9.65 billion to $9.7 billion. This would mark an increase of about 6.5% versus last year. Non-GAAP earnings per share are projected in the range of $11.10 to $11.22 per share.

So is MSI stock still a buy at current levels of around $269 per share? MSI stock currently trades at about 24x forward earnings. Although this is a relatively high multiple in the current market environment, there are a couple of reasons to consider the stock. MSI’s core LMR product is a cash cow of sorts, given that customers are generally locked in once they buy into the system. Moreover, governments don’t meaningfully scale down public safety-related budgets, even during economic downturns. The company’s growing cash generation has helped it to raise its dividend at an average rate of over 10% over the last five years to above $3.50 per share. Motorola’s revenue visibility is also improving, with the total contract backlog rising by 6% year-over-year to $14.3 billion as of the end of the last quarter. MSI has also been investing its cash flows from its LMR business into strategic acquisitions in the public security space. Over the last few years, the company expanded into areas including video security and command center software. Late last year, Motorola acquired incident management company Rave Mobile Safety. We value MSI stock at about $284 per share, which is slightly ahead of the current market price. See our analysis Motorola Valuation: Is MSI Stock Expensive Or Cheap? for more details.

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[1] Month-to-date and year-to-date as of 3/17/2023
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