Can Higher Revenues Drive Motorola's (MSI) Q4 Earnings?

Motorola Solutions, Inc. (NYSE:MSI) is scheduled to report fourth-quarter 2018 results after the closing bell on Feb 7. In the last reported quarter, the company delivered a positive earnings surprise of 12.8%. Notably, Motorola surpassed the Zacks Consensus Estimate for earnings in each of the last four quarters, the average beat being 12.7%.

For the fourth quarter, the company is likely to report higher consolidated revenues on a year-over-year basis, supported by healthy growth trajectory. Whether this could result in an earnings beat remains to be seen.

Factors to Consider

Motorola’s Products & Systems Integration segment comprises a wide portfolio of infrastructure, devices and accessories along with systems integration. As the leading provider of mission-critical communication products and services for government and commercial customers alike, Motorola has a steady revenue stream from this niche market. In an effort to further expand its public safety measures, the company has launched new broadband service, high power mobile radio and mobile app solutions, dedicated to public security.

With robust organic growth, disciplined capital deployment and favorable growth dynamics, the Products & Systems Integration segment is likely to record revenues of $1,598 million in the fourth quarter, up from $1,233 million recorded in the year-ago quarter.

The Services and Software segment has been another area of significant focus. The company has expanded its services installed base and is building an end-to-end public safety command center platform. During the quarter, Motorola selected Microsoft (NASDAQ:MSFT) Azure Government as the cloud provider for its public safety software suite to improve its security portfolio. The strategic move would enable the company to augment flexibility and security features to help agencies work efficiently across hybrid architecture that combine both on-premises and cloud solutions.

Management expects the segment to grow at a faster rate than Products and Systems Integration segment, and to drive meaningful operating margin expansion in 2019 and beyond. The company’s Services and Software primarily comprises recurring revenues, including Managed & Support Services, public safety and enterprise command center software, video software and unified communications applications.

Motorola expects to strengthen its leading position in the public safety domain by collaborating with other players in the ecosystem. As the public safety market continues to embrace software offerings to enhance workflows, the company is able to sell cloud-first SaaS offerings in addition to on-premise solutions with ancillary implementation and managed services. It continues to expand its software offerings to provide solutions across the various segments of the public safety workflow. The Services and Software segment is likely to record revenues of $618 million in the fourth quarter, down from $724 million recorded a year ago.

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With solid organic growth driven by continued strength in demand curve, Motorola is likely to record healthy top-line growth. The Zacks Consensus Estimate for total revenues for the quarter is pegged at $2,219 million. In the year-earlier quarter, it generated revenues of $1,957 million.

Earnings Whispers

Our proven model does not conclusively show that Motorola is likely to beat earnings this quarter as it does not possess the key components. A stock needs to have both a positive Earnings ESP Filter .