Zebra Technologies Gains From Business Strength Amid Headwinds
Zebra Technologies Corporation ZBRA has been benefiting from the solid momentum in its Enterprise Visibility & Mobility segment. Higher sales of mobile computing products are driving the segment’s revenues, which increased 8.6% year over year in the second quarter of 2024. Also, increased sales of services and software and contributions from recent acquisitions bode well for the segment.
Over time, the company has steadily strengthened its business through acquisitions. ZBRA’s acquisition of Matrox Imaging (June 2022) enabled it to combine its fixed industrial scanning and machine vision portfolio with the latter’s expertise in the imaging market. Also, the acquisition of antuit.ai (October 2021) complemented the planning and demand forecasting module for its retail software portfolio.
ZBRA remains committed to cost-management actions. For instance, in the second quarter, its gross margin increased 50 basis points to 48.4%, supported by lower freight costs. Recently, the company substantially completed the actions under its 2022 productivity plan and employee voluntary retirement plan. These actions are expected to generate annualized net cost savings of about $120 million, boost margins and produce more fuel to invest in organic growth.
Zebra Technologies focuses on increasing its shareholders' wealth through share repurchases. Though the company did not repurchase any shares in the first six months of 2024, it repurchased shares worth $52 million in 2023.
In May 2022, its board of directors authorized a share repurchase program for up to $1 billion. Exiting the second quarter of 2024, it had $893 million remaining under this program. Also, while free cash flow was negative in 2023, ZBRA expects the same to be at least $700 million in 2024.
ZBRA Stock’s Price Performance
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In the past year, this Zacks Rank #3 (Hold) company has gained 57.7% compared with the industry’s 47.6% growth.
Despite the positives, the company has been bearing the brunt of weak demand for printing solutions and RFID products. This has been affecting the performance of its Asset Intelligence & Tracking segment, whose sales declined 13.5% in the second quarter on a year-over-year basis.
High debt levels also remain a major concern for the company. Exiting the second quarter, its long-term debt totaled $2.08 billion compared with its cash and cash equivalents of $411 million. Also, the stock looks more leveraged than the industry. Its debt/capital ratio is currently 0.39, higher than 0.37 of the industry.
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