Interpreting the Gradual Decline of Motorola’s Operating Expenses in 3Q15
Motorola Solutions' 3Q15 Results: Investor Highlights
Operating expenses in 3Q15
Motorola Solutions’ (MSI) operating expenses have been declining YoY since 3Q12. In 3Q12, the company’s operating expenses were $532 million compared to $478 million in 3Q13, and the $435 million it spent in 3Q14 fell to $396 million in 3Q15. Motorola’s operating margin was 20.5% in 3Q15.
This gradual decrease in operating expenses came from the $39 million it saved from cost reductions and simplification initiatives across all categories, as well as from lower pension expenses and the stronger dollar in 3Q15 compared to 3Q14. For fiscal 2015, the company’s operating expenses are expected to be $1.58 billion, which represents a YoY (year-over-year) decrease of $200 million compared to 3Q14.
By comparison, the operating margins for peer companies like Cisco Systems (CSCO) and Harris Corporation (HRS) were 22.43% and 5.99%, respectively, during their last reported quarters.
Capex, free cash flow, and shareholder returns
Motorola’s capital expenditures increased by 3% YoY from $47 million in 3Q14 to $50 million in 3Q15, whereas the company’s free cash flow per share increased even more considerably from -$0.65 in 3Q14 to $1.24 in 3Q15.
In 3Q15, Motorola engaged in a share repurchase program and paid $70 million in cash dividends. Since 3Q11, Motorola has paid $1.2 billion in dividends and has seen a 49% reduction in its share count as of November 3, 2015. As of the same date, the firm has spent over $12 billion in shareholder returns since 3Q11, and at the end of 3Q15, Motorola had a net debt position of $2.2 billion of net debt and cash.
You can gain exposure to Motorola Solutions (MSI) by investing in the iShares Russell Midcap Growth ETF(IWP) and the iShares S&P Global Technology Sector ETF (IXN). Motorola accounts for 0.40% of IWP and 0.30% of IXN.
Now continue to the next part of this series, wherein we’ll look at Motorola’s moving averages following its 3Q15 earnings release.
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