Can Motorola Solutions Inc. (MSI) Surprise Earnings in Q3?

Motorola Solutions Inc. (MSI) is set to release third-quarter 2014 results before the opening bell on Nov 4.

In the last quarter, the company delivered a negative 23.08% surprise. Let’s see how things are shaping up for this announcement.

Factors to Consider

Motorola Solutions continues to boost its public safety LTE portfolio by investing heavily in Android and new devices like TC55 and LEX 700. Further, the government’s decision to deploy a nationwide wireless network for public safety may generate revenues for the company over the long run.

Motorola also collaborated with Verizon Wireless to install a standard-based public safety broadband network for mission-critical operations leveraging on the nationwide LTE network of the latter.

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 to gradually phase out iDEN network in the next three to four year is a major setback for Motorola.

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, 2 or at least 3 for this to happen. Unfortunately, this is not the case here as elaborated below.

Zacks ESP: The Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is currently pegged at 0.00%, as both these estimates stand at 36 cents.

Zacks Rank: Motorola Solutions’ Zacks Rank #3 (Hold) increases the predictive power of ESP. However, we also need to have a positive ESP to be confident of an earnings beat.

We caution against stocks with a Zacks Rank #4 and 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:

BlackBerry Ltd. (BBRY) with an earnings ESP of +83.33% and a Zacks Rank #2 (Buy).

Ruckus Wireless, Inc. (RKUS) with an earnings ESP of +60.00% and a Zacks Rank #2.

DragonWave Inc. (DRWI) with an earnings ESP of +16.67% and a Zacks Rank #3.