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Motorola Solutions Inc MSI

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Morningstar’s Analysis

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Motorola Solutions Raises Guidance After Strong Quarter, Meeting Our Prior Expectations; $175 FVE

Analyst Note

| William Kerwin |

Narrow-moat Motorola Solutions exceeded its top- and bottom-line guidance in the second quarter, and modestly raised its full year outlook to reflect increased confidence in second-half demand. Our $175 fair value estimate for Motorola is unchanged, as the new outlook aligns with our previous above-guidance expectations for fiscal 2022. We’re also pleased to see continued growth for the firm’s software and services segment, and continue to believe a heavier software mix will drive margin expansion for Motorola through 2025. We think Motorola is benefiting from looser security budgets as the U.S. economy rebounds from 2020, and think it will see multi-year demand as state and local governments digest funds from U.S. government stimulus during the pandemic. Still, we think of Motorola as a steady grower, and think the market is painting a more rapid sales growth and margin expansion picture than is reasonable. We currently view shares as overvalued, and would recommend waiting for a pullback to invest.

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Company Profile

Business Description

Motorola Solutions is a leading provider of communications and analytics, primarily serving public safety departments as well as schools, hospitals, and businesses. The bulk of the firm’s revenue comes from sales of land mobile radios and radio network infrastructure, but the firm also sells surveillance equipment and dispatch software. Seventy-five percent of Motorola’s revenue comes from government agencies, while 25% comes from its commercial customers. Motorola has customers in over 100 countries and in every state in the United States.

500 West Monroe Street, Suite 4400
Chicago, IL, 60661
T +1 847 576-5000
Sector Technology
Industry Communication Equipment
Most Recent Earnings Jun 30, 2021
Fiscal Year End Dec 31, 2021
Stock Type Cyclical
Employees 18,000