Jim Cramer: Why Zebra Technologies (ZBRA) Will Be Bought After Motorola Solutions (MSI) Deal

NEW YORK (TheStreet) -- TheStreet's Jim Cramer is surprised Zebra Technologies  (ZBRA) is not performing better today after the company acquired the enterprise business of Motorola Solutions  (MSI).

Cramer says Zebra "pants-ed" Motorola with the deal to buy the "barcode division" and says the company paid a "relative song" compared to what Motorola paid for it in 2006. Furthermore, he believes the deal cements Zebra's hold on the mobile barcode business.

Cramer thinks Zebra has strong opportunities here even though the stock went up "way too much" in pre-market trading. He believes the stock will be bought rather than sold when the smoke clears.

Zebra hit a one-year high of $71.74 but was down 10.97% to $60.79 at 2:42 p.m., while Motorola Solutions was down 1.29% to $62.96.

Must Watch: Jim Cramer on Zebra Technologies & Motorola Solutions Deal

----------

Separately, TheStreet Ratings team rates ZEBRA TECHNOLOGIES CP as a "buy" with a ratings score of A. TheStreet Ratings Team has this to say about their recommendation:

"We rate ZEBRA TECHNOLOGIES CP (ZBRA) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, expanding profit margins, good cash flow from operations and solid stock price performance. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth came in higher than the industry average of 2.0%. Since the same quarter one year prior, revenues rose by 12.4%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • ZBRA has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with this, the company maintains a quick ratio of 5.02, which clearly demonstrates the ability to cover short-term cash needs.
  • Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 46.75% over the past year, a rise that has exceeded that of the S&P 500 Index. Regarding the stock's future course, although almost any stock can fall in a broad market decline, ZBRA should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • ZEBRA TECHNOLOGIES CP has improved earnings per share by 20.6% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, ZEBRA TECHNOLOGIES CP increased its bottom line by earning $2.64 versus $2.35 in the prior year. This year, the market expects an improvement in earnings ($3.45 versus $2.64).
  • The gross profit margin for ZEBRA TECHNOLOGIES CP is rather high; currently it is at 52.01%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 14.63% is above that of the industry average.
  • You can view the full analysis from the report here: ZBRA Ratings Report

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

Separately, TheStreet Ratings team rates MOTOROLA SOLUTIONS INC as a "buy" with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:

"We rate MOTOROLA SOLUTIONS INC (MSI) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, notable return on equity, good cash flow from operations, largely solid financial position with reasonable debt levels by most measures and increase in net income. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • MSI's revenue growth has slightly outpaced the industry average of 1.0%. Since the same quarter one year prior, revenues slightly increased by 2.6%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Communications Equipment industry and the overall market, MOTOROLA SOLUTIONS INC's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • Net operating cash flow has increased to $741.00 million or 31.38% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 19.80%.
  • The net income growth from the same quarter one year ago has exceeded that of the Communications Equipment industry average, but is less than that of the S&P 500. The net income increased by 1.8% when compared to the same quarter one year prior, going from $336.00 million to $342.00 million.
  • MSI's debt-to-equity ratio of 0.67 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Despite the fact that MSI's debt-to-equity ratio is mixed in its results, the company's quick ratio of 1.63 is high and demonstrates strong liquidity.
  • You can view the full analysis from the report here: MSI Ratings Report

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

More from Markets

Stocks Dive Globally as U.S.-China Trade War Intensifies

Stocks Dive Globally as U.S.-China Trade War Intensifies

Global Oil Prices Mixed as OPEC Production Talks, China Tariffs Weigh on Markets

Global Oil Prices Mixed as OPEC Production Talks, China Tariffs Weigh on Markets

Cryptocurrencies Could 'Bring the Internet to a Halt', Central Bank Agency Warns

Cryptocurrencies Could 'Bring the Internet to a Halt', Central Bank Agency Warns

Volkswagen's Audi CEO Arrested in Diesel Emissions Probe

Volkswagen's Audi CEO Arrested in Diesel Emissions Probe

China Trade War, Google, JD.com, Tesla, Brooks Koepka - 5 Things You Must Know

China Trade War, Google, JD.com, Tesla, Brooks Koepka - 5 Things You Must Know