Motorola Solutions (MSI) Earnings Report a 30% YoY EPS Increase

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Motorola Solutions (MSI) reported strong first quarter earnings, but sees a fall off coming in the second quarter. The company saw earnings per share of $1.12 in the latest quarter, a 30% increase year-over-year. Motorola was able to achieve the strong EPS on flat revenue of $1.7 billion.

Greg Brown, Motorola Solutions CEO, said the company’s strong showing in the face of COVID-19, was due to the “critical nature” of the products and services provided by Motorola. Video security, software and services, all had strong showings in the quarter.

MSI reported an increase in order backlog of $48 million, which puts the current backlog of business at $10.4 billion. Operating cash flow was $308 million for the quarter, up 23% year-over-year.

MSI was also able to increase margins in the quarter, not through cost cutting measures, but through margin expansion in the company’s Software and Services segment. The GAAP operating margin was 15.6%, beating year-over-year results of 13.8%.

Commenting on the recent quarter in the company’s conference call, Brown said, “We continue to see strong demand for our Video Security Solutions, highlighted by a $28 million order from a large utility in North America, the single largest order in the history of the Avigilon business, and our Software & Services segment grew sales by 13%”

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While the quarter came in strong, Motorola Solutions did make the decision to draw down a line of credit of $800 million, as a backstop to any issues that may arise as the economy battles through the COVID-19 epidemic. 

According to Gino Bonanotte, Motorola Solutions CFO, the company “ended the quarter with $1.7 billion in cash and has an additional $1.4 billion of committed undrawn capacity remaining on the revolver.”

Related: MSI Picked By RIO For Mining Communications System

Due to a concentrated effort at debt reduction, the company also comes into the next two years with no debt maturities in either 2020 or 2021. The company has structured its pension obligations so that no payment is due into the plan until 2023, removing yet another possible strain on the business.

While Motorola withdrew 2020 guidance, they did say second quarter revenue could decline by between 14% and 17%. MSI is down a little over 21% so far in 2020, to trade at just over $125 currently. The company’s recent PE ratio is just under 25.

Steven Adams’s personal position in Motorola Solutions: none.

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