What's In The Offing For Motorola (MSI) In Q4 Earnings?

Motorola Solutions, Inc. (NYSE:MSI) is scheduled to report fourth-quarter 2017 results on Feb 1 after the market closes.

Last quarter, the company delivered a positive surprise of 9.3%. Moreover, it boasts an impressive earnings history, having outperformed the Zacks Consensus Estimate in each of the preceding four quarters with an average beat of 13.2%.

Let’s see, how things are shaping up prior to this announcement.

Factors at Play

Motorola’s results in the fourth quarter are likely to be aided by a strong performance of its land and mobile radio operations. The company anticipates revenues for the to-be-reported quarter to improve around 3% on a year-over-year basis. Adjusted earnings per share for the period are projected between $2.00 and $2.05.

The company’s growth by acquisition strategy is impressive. To this end, in August 2017, the company completed the buyout of Kodiak Networks, which has strengthened its software portfolio and is anticipated to drive results in the quarter.

The company’s initiatives to reward shareholders through dividends and share buybacks are also encouraging. Notably, in November 2017, the company hiked its dividend by 11% to 52 cents a share (or $2.08 annually) from 47 cents (or $1.88 annually).

However, merger-related costs have been limiting the company’s bottom-line growth, which in turn is likely to hurt results in the quarter. Also, a weak balance sheet might further affect performance in the period to be reported.

Moreover, higher working capital requirement due to the implementation of a new ERP (Enterprise resource planning) system has been hindering the company's cashflow from operations. This downside is likely to heavily weigh on the metric in the soon-to-be-reported quarter as was the case in the third quarter of 2017.

Earnings Whispers

Despite the company’s outstanding earnings history, our quantitative model does not conclusively show that Motorola Solutions is likely to beat estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a solid Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. But that is not the case here as you will see below:

Zacks ESP: Motorola Solutions has an Earnings ESP of -0.99% as the Most Accurate estimate is pegged lower at $2.01 per share than the Zacks Consensus Estimate of $2.03. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Motorola Solutions has a Zacks Rank #2, which increases the predictive power of ESP. However, a company needs a positive ESP as well to be confident about an earnings surprise. Hence, this combination leaves surprise prediction inconclusive.

Conversely, all Sell-rated stocks (#4 or 5) should never be considered going into an earnings announcement, especially when the company is seeing negative estimate revisions.

Motorola Solutions, Inc. Price and EPS Surprise

Motorola Solutions, Inc. Price and EPS Surprise | Motorola Solutions, Inc. Quote

Stocks to Consider

Investors interested in stocks worth considering from the broader Computer and Technology sector may check out the following companies with the right combination of elements to beat on earnings:

Apple Inc. (NASDAQ:AAPL) has an Earnings ESP of +1.56% and a Zacks Rank #3. The company will report first-quarter fiscal 2018 financial figures on Feb 1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Advanced Energy Industries, Inc. (NASDAQ:AEIS) has an Earnings ESP of +0.41% and is a Zacks #3 Ranked player. The company will release fourth-quarter results on Jan 30.

Arrow Electronics, Inc. (NYSE:ARW) has an Earnings ESP of +0.61% and is a #3 Ranked player. The company will announce fourth-quarter earnings on Feb 6.

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