How Will Motorola Solutions (MSI) Stock React To This Downgrade Today?

NEW YORK (TheStreet) -- Motorola Solutions Inc. (MSI) was downgraded to "underperform" from "neutral" by analysts at Mizuho Securities on Thursday based on lower pro-forma earnings, following the enterprise sale.

In April, the communications company agreed to sell a bulk of its enterprise business to Zebra Technologies Corp. (ZBRA) for $3.5 billion in cash.

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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 good cash flow from operations, solid stock price performance, largely solid financial position with reasonable debt levels by most measures, expanding profit margins and notable return on equity. We feel these strengths outweigh the fact that the company has had sub par growth in net income."

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

  • Net operating cash flow has significantly increased by 248.38% to $46.00 million when compared to the same quarter last year. In addition, MOTOROLA SOLUTIONS INC has also vastly surpassed the industry average cash flow growth rate of -10.68%.
  • Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • MSI's debt-to-equity ratio of 0.66 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.
  • MSI, with its decline in revenue, slightly underperformed the industry average of 2.3%. Since the same quarter one year prior, revenues slightly dropped by 8.7%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • 49.75% is the gross profit margin for MOTOROLA SOLUTIONS INC which we consider to be strong. Regardless of MSI's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, MSI's net profit margin of 7.05% is significantly lower than the industry average.
  • You can view the full analysis from the report here: MSI Ratings Report
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