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Motorola Solutions’ 3Q15 Results: Stock Reaction to Low Guidance

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3Q15 results

On November 4, 2015, Motorola Solutions (MSI) announced its 3Q15 results and reported revenues of $1.4 billion, a 1% YoY (year-over-year) decrease including $54 million from unfavorable foreign currency exchange. The company’s gross profits for 3Q15 were $685 million, similar to what it reported in 3Q14, while its operating income increased by 11.59% YoY from $207 million in 3Q14 to $231 million in 3Q15.

In comparison, Cisco Systems (CSCO) and Harris Corporation (HRS) reported revenues of $12.84 billion and $1.53 billion, respectively, for their corresponding quarters.

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Net income and EPS

Motorola’s net income, however, decreased from $147 million in 3Q14 to $115 million in 3Q15. This difference was primarily due to the $81 million Motorola earned in 3Q14 from “discontinued operations.”

The company’s Non-GAAP (generally accepted accounting principles) EPS (earnings per share) from continuing operations stood at $0.82 compared $0.62 in 3Q14. Motorola generated $300 million in operating cash flow and $250 million in free cash flow in 3Q15.

After the 3Q15 results were released, Motorola Solutions CEO Greg Brown stated that the business “showed resilience in the third quarter despite a mixed global economic environment and significant currency headwinds.” Brown added that Motorola “delivered a strong quarter of 32 percent earnings per share growth, additional cost reductions and more than $2 billion of capital return,” specifying that the company believes it is “well positioned for significant growth in operating earnings and free cash flow per share.”

Analyst estimates and weak guidance

Motorola beat analyst revenue estimates of $1.41 billion by $1 million. It beat analyst EPS estimates of $0.73 by $0.09 per share. But the firm’s stock fell by over 8% on November 4, following the weak guidance it provided for 4Q15.

You can gain exposure to Motorola Solutions by investing in the iShares Russell Midcap Growth ETF(IWP) and the iShares S&P Global Technology Sector ETF (IXN). Motorola accounts for 0.40% of IWP and 0.30% of IXN.

Continue to the next part of this series for a discussion of how foreign currency exchange impacted Motorola’s 3Q15 revenues.

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