Motorola Solutions Inc. (MSI) reported disappointing financial results for the third quarter of 2014, wherein both earnings and revenues missed the Zacks Consensus Estimate.
Quarterly GAAP net income from continuing operations came in at $66 million or 27 cents per share compared with $261 million or 98 cents per share in the prior-year quarter. Adjusted earnings per share of 35 cents missed the Zacks Consensus Estimate by a penny.
Quarterly total revenue was $1,436 million, down 5.3% year over year and also short of the Zacks Consensus Estimate of $1,543 million. The decline in sales was primarily due to poor demand in North America and the Asia Pacific.
Quarterly gross margin stood at 47.7% against 50.4% in the prior-year quarter. Operating income, in the reported quarter, was $207 million, down 16% year over year. Quarterly operating margin was 14.4% compared with 16.2% in the prior-year quarter.
Motorola Solutions generated a negative $115 million in cash from operations in third-quarter 2014 compared with $76 million in the year-ago quarter. Quarterly free cash flow was negative $162 million as against $45 million in the year-ago quarter.
At the end of the reported quarter, Motorola Solutions had $2,845 million in cash and cash equivalents compared with $3,225 million at the end of 2013. Total debt, at the end of the reported quarter, stood at $3,401 million as against $2,457 million at the end of 2013. The debt-to-capitalization ratio at the end of third-quarter 2014 was 0.51 compared with 0.40 at the end of 2013.
Segment Wise Results
Quarterly Product revenues totaled $921 million, down 7.7% year over year. Services revenues were $515 million, down 0.8% year over year. Quarterly Product operating margin was 15.3% compared with 17.1% in the year-ago quarter. Services operating margin was 12.8% as against 14.5% in the comparable year-ago quarter.
Financial Outlook
Motorola Solutions expects revenues in fourth-quarter 2014 to drop 1% to 3% year over year while non-GAAP earnings per share from continuing operations are likely to be in the range of $1.13 to $1.19.
Zacks Rank
Motorola Solutions currently has a Zacks Rank #3 (Hold). Better-ranked stocks worth considering in the wireless equipment sector include InterDigital, Inc. (IDCC), QUALCOMM Incorporated (QCOM) and Sonus Networks, Inc. (SONS). InterDigital and QUALCOMM hold a Zacks Rank #1 (Strong Buy), whereas Sonus Networks carries a Zacks Rank #2 (Buy).
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