Zebra Technologies Corporation’s ZBRA shares have surged 42.7% in the year-to-date period, outpacing the industry and the Industrial Products sector’s growth of 40.5% and 9.6%, respectively. The company has outperformed its market peers like John Bean Technologies Corporation JBT and Honeywell International Inc. HON, which have returned 28.1% and 8.3%, respectively, over the same time frame.
ZBRA Outperforms Industry, Sector & S&P500
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Closing at $390.65 in the last trading session, the stock is trading below its 52-week high of $413.44 but significantly higher than its 52-week low of $233.95.
As a global enterprise asset intelligence solutions provider, ZBRA rides on its strong foothold and improving conditions in the automatic identification and data capture solutions industry. The company’s efforts to strengthen its product portfolio beyond the core manufacturing, retail, transportation and logistics end markets have also enhanced its market share across the public sector, healthcare, e-commerce and other industrial markets.
Factors Favoring Zebra
Zebra Technologies is witnessing strong momentum in its Enterprise Visibility & Mobility segment. The growing popularity of the company’s mobile computing and data capture solutions, supported by an increase in customers’ investments in technology capabilities across enterprises and supply chains, is driving the segment’s results. An increase in sales of services and software, driven by retail software wins, is also aiding the segment. Revenues from the segment increased 33.7% year over year in the third quarter of 2024.
Recovery in demand for printing solutions and radio frequency identification devices products is also boosting the Asset Intelligence & Tracking segment’s performance. In the third quarter, the segment’s revenues increased 26.5% on a year-over-year basis.
ZBRA has also been advancing digital capabilities, optimizing the supply chain, expanding its data analytics capability and focusing on marketing activities to better engage with customers. Driven by these initiatives and the modest recovery in demand, the company expects fourth-quarter 2024 net sales to increase in the band of 28-31% from the prior year.
Zebra’s focus on cost-management actions enabled it to reduce its total operating expenses by 3.9% in the third quarter. The company completed its actions under the 2022 productivity plan and employee voluntary retirement plan in the third quarter. These actions have impacted more than 9% of its global employee base, which is likely to generate an annualized net cost savings of about $120 million.
These efforts are likely to boost margins and produce more fuel to invest in organic growth. It’s worth noting that it has achieved $110 million in net savings till September 2024, with $50 million in 2023 and $60 million in the first nine months of this year.
ZBRA also remains committed to rewarding its shareholders through dividend payments and share buybacks. The company repurchased shares worth $16 million and $52 million in the first nine months of 2024 and 2023, respectively. Exiting the third quarter, it had $877 million remaining under its share repurchase program. While free cash flow was negative in 2023, the company expects the same to be at least $850 million in 2024. This should support its shareholder-friendly policies.
Given the strength across its businesses, the Zacks Consensus Estimate for Zebra’s 2024 and 2025 revenues is pegged at $5 billion and $5.3 billion, indicating year-over-year growth of 8.1% and 5.9%, respectively.
Better Returns Than Industry
ZBRA’s trailing 12-month return on equity (ROE) is indicative of its growth potential. ROE for the trailing 12 months is 18%, much higher than the industry’s 14.3%, reflecting the company’s efficient use of shareholders’ funds.
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Return on assets is 7.83%, also ahead of the industry’s 6.56%, indicating that Zebra has been utilizing its assets efficiently to generate returns.
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Stock Valuation
With a forward 12-month price-to-earnings ratio of 24.52X, which is below the industry average of 25.68X, ZBRA stock presents an attractive valuation for investors. Also, the stock is cheaper than its peer, Cognex Corporation CGNX, which is overvalued than the industry.
Price-to-Earnings (Forward 12 Months)
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Northbound Earnings Estimates
Earnings estimates for 2024 have increased 10.6% to $14.04 per share over the past 60 days, while the estimates for 2025 have improved 5.3% to $15.97. The figures indicate year-over-year growth of 43% and 13.7% for 2024 and 2025, respectively. Find the latest EPS estimates and surprises on Zacks Earnings Calendar.
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Should You Buy ZBRA Now?
Solid momentum across its end markets, robust product portfolio, focus on expanding its data analytics capabilities and cost-saving initiatives position Zebra favorably for strong growth in the quarters ahead.
ZBRA is well-positioned to deliver sustained growth and shareholders’ value with a favorable valuation compared with the industry and its peers, and strong earnings projections. We believe that the stock is an ideal candidate for investors' portfolio addition. The company currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
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Zebra Technologies Corporation (ZBRA) : Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
