Raising Rating to BUY; 3Q Tops Our Forecast
- 3Q17 (Sept) adjusted EPS of $1.87 (vs $1.43 a year earlier), rose 31%, 5 cents above our estimate (and 14 cents over consensus), aided by organic growth of 6%;
- Organic growth was driven by large deals in the mobile computing space, which we anticipate to accelerate as Microsoft is exiting the Windows 10 market, benefiting the Android operating system and Zebra’s leadership position in Android-based mobile devices;
- Our 2017 EPS projection is now $6.93 (from $6.80), up 23% from 2016, aided by significantly lower interest expense;
- Our 2018 EPS estimate is now $7.95 (from $7.78), up 15% from our 2017 projection;
- With the shares trading for only 13.9x our 12-month forward EPS estimate of $7.69, or 99% of our 14% projected 3-to-5 year EPS growth rate, our rating is now BUY (from Gradually Accumulate), with a 12-month price target of $173.
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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