We like this company’s long-term prospects as it’s a key supplier of vital communications gear to police, fire and other first responders.
Its high order backlog also cuts your risk and taken together, all these factors make this one of our top technology picks.
Meanwhile the stock trades at 24.7 times the company’s 2023 earnings forecast.
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MOTOROLA SOLUTIONS INC. (New York symbol MSI; www.motorolasolutions.com) makes specialized communications equipment such as radios for police and fire vehicles.
It also makes software that helps governments manage their emergency response call centres.
Motorola tends to fuel its growth with acquisitions. However, it cuts the risk of this strategy by focusing on smaller firms that enhance its technology or its presence in certain markets.
Some of its latest purchases include spending $388 million for Ava Security, which specializes in cloud-based video analysis, and $298 million for Openpath Security, which makes keyless entry systems for buildings.
Thanks to partly to acquisitions like those, Motorola’s revenue rose 23.6%, from $6.38 billion in 2017 to $7.89 billion in 2019. Revenue then fell 6.0% to $7.41 billion in 2020 as clients delayed new purchases due to COVID-19 disruptions. However, revenue rebounded 10.2% to $8.17 billion in 2021.
Earnings jumped 51.5%, from $923.0 million in 2017 to $1.40 billion in 2019; per-share earnings rose 45.8%, from $5.46 to $7.96 on more shares outstanding. Due to the lower revenue, earnings fell 4.2% to $1.39 billion ($7.69 a share) in 2020, but moved up to a record $1.59 billion ($9.15 a share) in 2021.
Motorola’s revenue in the second quarter of 2022 rose 8.6%, to $2.14 billion from $1.97 billion a year earlier. That gain was due to higher demand for its radio and video systems, particularly in North America. However, due to rising costs for computer chips and other components, earnings in the quarter were unchanged at $2.07 a share.
Growth Stocks: A record order backlog suggests there’s plenty of room to rise
In addition to acquisitions, Motorola continues to invest heavily in the development of new products. Its research spending in the latest quarter rose 5.5%, to $191 million (or 8.9% of revenue) from $181 million (or 9.2%) a year earlier.
The stock has gained 11% in the past year and recently hit a new all-time high of $275.16. That’s due to stronger demand for its products and improving supplies of chips and other components.
Motorola’s order backlog was a record $13.5 billion as of September 30, 2022. That represents about 1.5 times its annual revenue and is up 19% from a year earlier.
The company now expects its revenue rose between 9.25% and 9.5% in 2022, up from its earlier forecast of 8% growth. It also increased its full-year earnings forecast to between $10.17 and $10.22 a share from its previous estimate of $10.03 to $10.13. The stock trades at 24.7 times the midpoint of that new range. That’s a reasonable p/e in light of Motorola’s high market share.
Motorola is also increasing your quarterly dividend by 11.4%. Starting with the January 2023 payment, investors will receive $0.88 a share instead of $0.79. The new annual rate of $3.52 yields 1.4%.
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