Can Solid Top-Line Growth Buoy Motorola's (MSI) Q4 Earnings?

Motorola Solutions, Inc. (NYSE:MSI) is scheduled to report fourth-quarter 2019 results after the closing bell on Feb 6. In the last reported quarter, the company delivered a positive earnings surprise of 4.1%, surpassing the Zacks Consensus Estimate by 8 cents. In the fourth quarter, the company is likely to have generated higher consolidated revenues on a year-over-year basis, supported by healthy growth trajectory.

Factors at Play

During the fourth quarter, Motorola enhanced its security solutions portfolio by launching the Avigilon video for radio site security and the KVL 5000 key variable loader for secure communications through customized risk assessments and round-the-clock security monitoring. The company also unveiled WAVE PTX Government and Smart Connect solutions to fortify the key industries of Australia against various security threats and render fast response times to effectively mitigate operating risks. There are expected to reflect positively in the upcoming results.

In the quarter, Motorola inked an agreement with Marino’s Market, a leading supermarket in Alabama, to improve the security measures at its two store locations by deploying improved video safety and security solutions. Such innovative product launches and system deployment are likely to have translated into incremental revenues for the Products & Systems Integration segment. The Zacks Consensus Estimate for the segment revenues is pegged at $1,700 million, indicating a rise of 26% from the prior-quarter reported number.

The Services and Software segment has been another area of significant focus. During the fourth quarter, Motorola embraced AI-powered facial recognition technology by unveiling the Avigilon Control Center 7.4 video management software for enhanced safety measures in commercial enterprises. The company deems this ‘human in the loop’ approach as the cornerstone of its AI-enabled capabilities for effective compliance control mechanism.

In order to accelerate law enforcement investigations, Motorola also introduced ballistics and crime gun intelligence to its software portfolio by integrating Vigilant BallisticSearch and Vigilant CrimeSearch. While the former provides ballistics image capture and analysis, the latter helps in crime mapping, data retrieval and analysis tool. Additionally, during the fourth quarter, Motorola enhanced its Pronto digital policing application software to deliver comprehensive mobile information solutions to the police and fortify its digital evidence management system while providing greater transparency.

Buoyed by such software enhancements, the consensus estimate for Services and Software revenues is pegged at $673 million for the fourth quarter, indicating an improvement from $645 million generated in the previous quarter.

With solid demand across land mobile radio products and other devices, driven by a comprehensive suite of services that ensures continuity and reduces risks related to critical communications operations, Motorola is likely to have recorded healthy top-line growth. The Zacks Consensus Estimate for total revenues for the fourth quarter is pegged at $2,372 million. In the year-earlier quarter, it generated revenues of $2,254 million. The consensus estimate for earnings is currently pegged at $2.79 per share, indicating a rise from $2.63 reported in the year-earlier quarter. Management expects fourth-quarter 2019 non-GAAP earnings to be in the $2.75-$2.80 per share range on revenue growth of 5-5.5%.

Earnings Whispers

Our proven model does not predict an earnings beat for Motorola in the fourth quarter. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. This is not the case here.

Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is 0.00% as both are pegged at $2.79 per share. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Motorola has a Zacks Rank #4 (Sell).

Stocks to Consider

Here are some companies that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter:

T-Mobile US, Inc. (NASDAQ:TMUS) is scheduled to release quarterly numbers on Feb 6. It has an Earnings ESP of +1.39% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Earnings ESP for Viavi Solutions Inc. (NASDAQ:VIAV) is +1.06% and it carries a Zacks Rank of 3. The company is set to report quarterly numbers on Feb 4.

The Earnings ESP for Altice USA, Inc. (NYSE:ATUS) is +11.11% and it carries a Zacks Rank of 3. The company is scheduled to report quarterly numbers on Feb 12.

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