Motorola Solutions Q1 Results Top View, Boosts 2015 EPS Outlook

(RTTNews) - Communications equipment maker Motorola Solutions, Inc. (MSI) reported Tuesday a profit for the first quarter that declined from last year, despite improved operating margins, reflecting loss from discontinued operations and a sales drop.

Both adjusted earnings per share and quarterly sales topped analysts' expectations. The company also provided weak guidance for the second quarter and raised earnings forecast for the full-year 2015, while maintaining annual revenue outlook.

Motorola Solutions, which makes communication infrastructure, devices and software, was created in January 2011 when Motorola, Inc. was split into two independent public companies. The other entity, Motorola Mobility, was later acquired by Google, Inc. (GOOG).

Reports in early February said that Motorola Solutions was mulling the sale of the company and is said to be in talks with Honeywell International Inc. (HON) on a deal.

The company has reportedly been working with financial advisers for that past several months on the sale. Other potential buyers for the company could be private equity firms, Raytheon Co. (RTN) and General Dynamics Corp. (GD).

"The company delivered strong double-digit profitability growth in the first quarter, driven primarily by strength in our North America business and a leaner cost structure," Chairman and CEO Greg Brown said.

Schaumburg, Illinois-based Motorola Solutions reported net earnings attributable to company of $74 million or $0.34 per share for the first quarter, lower than $127 million or $0.49 per share in the prior-year quarter.

However, earnings from continuing operations for the quarter increased to $87 million or $0.40 per share from $85 million or $0.33 per share in the year-ago quarter.

Excluding items, adjusted earnings from continuing operations for the quarter was $0.38 per share, compared to last year's $0.28 per share, driven by lower overall operating expenses.

On average, 13 analysts polled by Thomson Reuters expected the company to report earnings of $0.25 per share for the quarter. Analysts estimates typically exclude special items.

Net sales for the quarter edged down to $1.22 billion from $1.23 billion in the same quarter last year, but topped twelve Wall Street analysts' consensus estimate of $1.19 billion. Sales include $40 million of unfavorable foreign currency impact.

Net sales from products increased 1 percent to $758 million, driven primarily by an improvement in device sales. Meanwhile, net sales from services were $465 million, down 2 percent from last year, driven by lower iDEN and system integration sales.

Operating margin for the quarter expanded 100 basis points to 9.7 percent from last year as a 220 basis points drop in gross margin was more than offset by a 410 basis points improvement in selling, general and administrative expenses as a percentage of net sales.

The decline in expenses was due largely to cost reduction and simplification initiatives across all categories as well as lower pension expense and a stronger dollar.

Looking ahead to the second quarter, the company expects revenues to decline 3 to 5 percent, and be flat to down 2 percent in constant currency from last year. It also projects adjusted earnings from continuing operations in a range of $0.51 to $0.56 per share.

Analysts expect the company to report second-quarter earnings of $0.59 per share on a revenue decline of 2 percent to $1.37 billion.

For the fiscal 2015, the company continues to expect revenues to be flat to down 2 percent, and growth of 1 to 3 percent in constant currency from 2014. The company now expects adjusted earnings per share from continuing operations in the range of $3.20 to $3.40 per share, up from the prior forecast range of $3.15 to $3.35 per share.

Street is currently looking for full-year 2015 earnings of $3.25 per share on annual revenue decline of 1.2 percent to $5.81 billion.

MSI closed Tuesday's regular trading session at $58.59, down $0.03 on a volume of 2.34 million shares. In the past 52-week period, the stock has been trading in a range of $57.79 to $70.26.