We like to see companies working to improve themselves by increasing efficiency and launching new products. We also like to see companies supported by compelling secular trends that keep the top line rising, asserts Richard Moroney, editor of Dow Theory Forecasts.
Zebra Technologies (ZBRA) appeals to us on both fronts. Named because of the stripes on its bar codes, Zebra controlled at least 40% of the markets for bar-code printing and business mobile computing in 2017.
Zebra’s products allow customers to assess the location and condition of their assets, then determine whether they need to be replaced, fixed, or moved.
The company calls this process enterprise asset intelligence, tracking and directing equipment in factories, workers in the warehouse, patients in hospitals, and inventory moving through the supply chain, in addition to the more traditional shoppers in the store.
In recent quarters, Android mobile computers, wearable devices, and mobile printers have seen strong demand. Going forward, Zebra expects big things from new radio frequency identification (RFID) and bioptic scanner products. The move toward cloud computing, mobility, and the connectivity of consumer products should keep driving growth.
Its products are all about improving customers’ efficiency with their assets, so it seems only fitting that the company is at the same time growing more efficient.
In the 12 months ended June, Zebra’s operating margin reached 18.6%, its highest since 2014 and up from 15.5% two years ago. Zebra grew 12-month sales 10%, per-share earnings 48%, and operating cash flow 19%.
Consensus targets (sales growth of 11% and per-share-profit growth of 29% in the second half of 2018) imply continued margin gains. The stock is a Long-Term Buy.
