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Motorola Solutions (MSI) Q1 Earnings: A Surprise in Store?

Motorola Solutions, Inc. MSI is scheduled to release first-quarter 2016 earnings on May 5, after market close.

In the fourth quarter of 2015, Motorola Solutions had posted a positive earnings surprise of 7.14%. In fact, the company has an impressive track record with respect to earnings, having outshined the Zacks Consensus Estimate in each of the last four quarters, the average being 24.67%.

Let’s see how things are shaping up for this announcement.

Factors Likely at Play

This Schaumburg, Illinois-based company is expected to grapple with foreign currency issues on the revenue front in the first quarter, as has been the case in the preceding quarter. Mirroring this apprehension, Motorola Solutions anticipates a 4% to 6% decline in revenues in the first quarter on a year-over-year basis (assuming a $20 million adverse currency impact).

However, the acquisition of Airwave Solutions Ltd, completed in February this year, will boost results in the quarter. Moreover, the company’s efforts to reward shareholders through dividends/buybacks encourage us.  During the fourth quarter of 2015, the company returned $239 million to shareholders through buybacks ($179 million) and dividend payments ($60 million). We expect an update on the Airwave Solutions integration process and the company’s shareholder friendly activities during the first-quarter conference call.

Earnings Whispers

Our proven model does not conclusively show that Motorola Solutions is likely to beat the Zacks Consensus Estimate this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here, as you will see below:

Zacks ESP: The ESP for the company stands at 0.00% as the Most Accurate estimate is in line with the Zacks Consensus Estimate of 33 cents per share.

Zacks Rank: Motorola Solutions has a Zacks Rank #3 which increases the predictive power of ESP. However, that alone is not sufficient to secure an earnings beat.

As a caution, we advise investors not to consider Sell-rated stocks (Zacks Rank #4 or 5) going into an earnings announcement.

Stocks to Consider

Here are some companies in the broader Computer & Technology sector worth considering instead as our model shows they have the right combination of elements to post an earnings beat this quarter.

Agilent Technologies A, with an earnings ESP of +2.56% and a Zacks Rank #2. The company is expected to report second-quarter fiscal 2016 results on May 16.

Microchip Technology MCHP, with an earnings ESP of +3.33% and a Zacks Rank #2. The company is scheduled to report fourth-quarter fiscal 2016 results on May 4.

Synopsys SNPS, with an earnings ESP of +6.38% and a Zacks Rank #1. The company is expected to report second-quarter fiscal 2016 results on May 18.

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SYNOPSYS INC (SNPS): Free Stock Analysis Report
 
MICROCHIP TECH (MCHP): Free Stock Analysis Report
 
AGILENT TECH (A): Free Stock Analysis Report
 
MOTOROLA SOLUTN (MSI): Free Stock Analysis Report
 
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