Motorola Solutions Inc.MSI is scheduled to release its second-quarter 2015 results before the opening bell on Aug 5.
Motorola Solutions has a mixed track record with respect to earnings. The company’s earnings have surpassed the Zacks Consensus Estimate in two of the last four quarters while missing the mark in the other two. The trailing four-quarter average earnings surprise is thus pegged at a positive 9.51%. Let’s see how things are shaping up for this announcement.
Factors at Play
We expect Motorola’s second quarter earnings to be hurt by soft European sales and declining iDEN revenues. Moreover, adverse foreign currency movement, courtesy a stronger dollar, will weigh on the top line. While announcing its first quarter results, Motorola had projected second quarter sales decline in the band of 3% to 5%. We do not expect Motorola to better the disappointing projection in view of the above headwinds.
Also, the company is heavily dependent on government expenditure for its revenues as the bulk of its total sale comes from government agencies. We are concerned that reduction in government expenditure and macroeconomic fluctuations may affect the company’s top line, going forward.
Nevertheless, we believe the North American region will continue to perform well in the second quarter. Moreover, we are impressed by Motorola’s efforts to reward shareholders consistently through dividend payments.
Earnings Whispers
Our proven model does not conclusively show that Motorola Solutions is likely to beat the Zacks Consensus Estimate this quarter. This 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. Unfortunately, that is not the case here, as elaborated below.
Zacks ESP: The Most Accurate estimate and the Zacks Consensus Estimate are both poised at 47 cents. Hence, the ESP for Motorola is 0.00%.
Zacks Rank: Motorola carries a Zacks Rank #3 (Hold) which increases the predictive power of ESP. However, a 0.00% ESP renders earnings surprise prediction inconclusive.
We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks to Consider
Here are some companies you may want to consider, as our model shows these have the right combination of elements to post an earnings beat this quarter.
Sprint Corporation S has an earnings ESP of +25.00% and a Zacks Rank #3. The company will report first-quarter fiscal 2015 results on Aug 4.
ZAGG Inc ZAGG has an earnings ESP of +12.50% and a Zacks Rank #1. The company will report second-quarter 2015 results on Aug 4.
Tangoe, Inc. TNGO has an earnings ESP of +14.29% and a Zacks Rank #3. The company will report second-quarter 2015 results on Aug 6.
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