Motorola Solutions: Profits in Public Safety

05/31/2017 2:54 am EST


Charles Carlson

Editor, DRIP Investor

One of the smallest companies in our Editor’s Portfolio in terms of market capitalization is Motorola Solutions (MSI), says Chuck Carlson, editor of DRIP Investor.

Market capitalization is determined by multiplying the per-share stock price by the number of outstanding shares and is basically the price tag Wall Street assigns a company.

Motorola Solutions sports a market cap of less than $14 billion. Partly because of its size, the company, which provides communications devices and infrastructure products and services, represents one of the more attractive takeover plays in the portfolio.

Motorola Solutions has had takeover rumors over the last few years, and it would not be surprising at some point for those rumors to become reality. Still, I own the stock not for its takeover appeal but for its decent fundamentals and long-term growth story.

Motorola Solutions is a remnant of the original Motorola company, the firm that pioneered mobile communications. Today’s Motorola Solutions sells communications products and services primarily to public safety and commercial customers.

The firm put up nice numbers in the latest quarter. Revenue rose 7% to nearly $1.3 billion, with adjusted earnings per share rising 37% to $0.71, handily beating the consensus earnings estimate of $0.57. The company ended the first quarter with a backlog of $8.5 billion, up $129 million from the year-earlier quarter.

For 2017 overall, the company raised its guidance to roughly 2% revenue growth and adjusted earnings per share of $5.08 to $5.23 versus previous guidance of $5.05 to $5.20.

With the increased focus on public safety in the U.S. and especially abroad — Motorola Solutions has been expanding its international footprint in recent years via acquisitions — I expect Motorola Solutions to see steady demand for its communications products and services.

The stock has ticked down from its 52-week high of nearly $88 per share and should find support in the low $80s. The stock, yielding more than 2%, represents an attractive buy for DRIP investors wanting exposure in the communications sector.

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