Motorola Solutions (MSI) — a holding in our Editor's Portfolio — is a nearly century-old company that is probably not well understood by investors, notes Chuck Carlson, dividend reinvestment specialist and editor of DRIP Investor.
Sure, the Motorola name is familiar to many, but Motorola has become much more than simply a “walkie-talkie” company. Indeed, the firm has undergone a transformation into a leading provider of software, systems, and hardware that assist first responders, security officials, and police in carrying out their tasks.
Motorola’s legacy is one of innovation. For example, the company developed the first car radio in 1930. The first words from the moon to Earth in 1969 were voiced through Motorola technology. Today, the firm is a major player in a variety of markets, such as land mobile radio (LMR) systems. LMR networks are private, encrypted, dedicated systems that are used primarily for public safety purposes.
The firm is a growing factor in video-security and access-control systems. The company has been growing this business via acquisitions. In the latest quarter, the firm purchased Calipsa, a leader in cloud-native advanced video analytics, and Videotec, a provider of ruggedized video security solutions.
Motorola is also a major player in body-worn cameras for public safety systems. For example, the City of Houston is deploying more than 3,000 body-worn cameras with cloud-based evidence management to help provide greater accountability and transparency.
The firm’s second-quarter results reflect the continuing strength in these markets. Sales of $2.1 billion were up 9% year over year and beat estimates. Per-share earnings also beat estimates. The firm ended the second quarter with a backlog of $13.4 billion, up 19% versus a year ago.
The strong backlog and operating momentum were big reasons the company raised its full-year revenue and earnings guidance. The company expects revenue growth for the year of 8%, up from its previous guidance of 7%. Per-share earnings are now expected to be between $10.03 to $10.13 versus previous guidance of $9.80 to $9.95.
Conclusion
Trading at 25 times the high-end guidance for 2022, Motorola Solutions is not a cheap stock. However, given the importance of the company’s products to society, the stock deserves its premium valuation.
Perhaps the company management says it best — “What we do, what we provide is a need-to-have, not a nice-to-have.” Because of the necessity of the company’s products and systems in an increasingly scary world, funding from government, public agencies, and schools should continue to be robust. The stock has outperformed the market over the last 12 months, and I expect the strong relative strength will continue.
