Motorola Solutions Poised to Gain from Contract Wins

On Dec 3, 2014, we issued an updated research report on Motorola Solutions Inc. (MSI).

Motorola Solutions has delivered negative earnings surprises in the last three quarters, with an average miss of 5.91%. Also, the company posted dismal third-quarter 2014 financial results with both the top and the bottom line missing the Zacks Consensus Estimate.

Motorola Solutions continues to boost its public safety LTE portfolio by investing heavily in Android and new devices like TC55 and LEX 700 and newly launched LEX L10. Moreover, a significant number of contract wins coupled with the government’s decision to deploy a nationwide wireless network for public safety may generate considerable revenues for the company while moving ahead.

Recently, Motorola Solutions completed the sale of its enterprise business for $3.45 billion and the proceeds will be used to boost shareholders wealth through the authorization of a $5 billion share repurchase program. Meanwhile, the divestiture of non-profitable segments will also drive margins for the company.

However, Motorola Solutions highly relies on government contracts for revenue generation as 70% of its total sales come from government agencies. Thus, reduction in government expenditure and macroeconomic fluctuations are likely to affect sales of the company significantly.

Moreover, the decision of Sprint Corp. (S) to gradually phase out iDEN network is another major setback for Motorola Solutions. To worsen matters, Sprint had initiated the elimination of iDEN networks in 2013 and the entire process will take around 3 to 4 years.

Motorola Solutions currently has a Zacks Rank #3 (Hold).

Stocks That Warrant a Look

Other better-ranked stocks worth considering in this sector include InterDigital, Inc. (IDCC) and Aruba Networks, Inc. (ARUN). Both the stocks carry a Zacks Rank #1 (Strong Buy).