EPS Modeled Up Over 30% for 2018 with Accelerating Organic Growth
- Organic growth is accelerating (6.5% for 2017), aided by an industry-wide transition to a new operating system for mobile computers, which should continue given 12 million devices still needing to switch by 2020.
- The shares are trading for 15.3x our 12-month forward EPS estimate, despite EPS projected up 33% to a record $9.40 in 2018 (after a 25% increase in 2017).
- Strong free cash flow has reduced debt to 3.2x EBITDA net of cash (down from 5.1x at the time of the acquisition of Motorola’s Enterprise Solutions business in 2014), projected to decline to 2.0x-to-2.5x by mid-2018, which will allow for bolt-on acquisitions and share repurchase.
- The operating margin is projected to improve to 17.6% in 2018 (from 16.5% in 2017 and 15.4% in 2016) due to sales leverage, operational efficiencies, and cost reductions.
Zebra Technologies designs, manufactures, and sells a range of automatic identification and data capture products, including: mobile computers, barcode scanners and imagers, radio frequency identification devices (RFID) readers, printers for barcode labeling and personal identification, real-time location systems, related accessories and supplies, such as labels and other consumables, and software utilities and applications. The company has two segments: Asset Intelligence and Tracking, which includes barcode and card printing, supplies, services, location solutions, and retail solutions; and Enterprise Visibility and Mobility, which includes mobile computing, data capture, RFID, and services.
Great Lakes Review is located in Cleveland, Ohio, was founded in 1981 and became a division of Wellington Shields & Co. LLC in 2011. Great Lakes Review is a research boutique focused on the fundamentally-oriented investor seeking companies that dominate their respective specialty niche regardless of industry. The objective is to make money for the long-term by gradually accumulating a diversified portfolio from a universe of no more than 30 companies. Although short-term-oriented accounts will be alerted to trading opportunities, aggressive sell recommendations are triggered only by a deterioration in long-term fundamentals, not by short-term blips or investor fancy. Coverage of those names that lose their earnings momentum or earnings predictability may be dropped and replaced with more vital candidates.
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