Truist Securities has updated its financial outlook on Zebra Technologies (NASDAQ: ZBRA) stock, increasing the price target to $345 from $315 while maintaining a Hold rating, following Zebra's second-quarter performance, which exceeded consensus earnings per share (EPS) expectations by 13.5%, attributed to a modestly better top line and notably strong margin results.
Zebra Technologies reported an adjusted gross margin of 48.6%, a year-over-year increase of 60 basis points. This improvement was primarily due to reduced costs in premium supply chains and favorable foreign exchange rates.
The Enterprise Visibility & Mobility (EVM) gross margins saw a significant rise of 200 basis points year-over-year, benefiting from a favorable mix of deals and robustness in high-margin services and software, coupled with the absence of elevated supply chain costs, said an analyst from Truist.
The company saw positive momentum across its end markets, with each major end market vertical showing sequential improvement from the previous quarter. Notably, the Retail/E-commerce sector, which had begun to show signs of recovery last quarter, continued to strengthen.
Meanwhile, healthcare grew in double digits, although it represents less than 10% of total sales. Both the Transportation & Logistics (T&L) and Manufacturing sectors improved sequentially, despite year-over-year declines in the mid-single to high-single digits. Zebra also saw a return to positive year-over-year growth in mobile computing across each end market.
Zebra's financial guidance has been revised upward, reflecting the company's strong quarter. Sales for the full year 2024 are now expected to increase by 4% to 7%, a rise from the earlier projection of 1% to 5%.
Adjusted EPS estimates have been set to a range of $12.30 to $12.90, with a midpoint of $12.60, an increase of $0.47 following the second-quarter beat and up from the prior guidance of $11.25 to $12.25. Furthermore, Zebra has raised its free cash flow (FCF) forecast by $100 million, now anticipating over $700 million for the year.
InvestingPro Insights
Zebra Technologies (NASDAQ: ZBRA) has been catching the eye of analysts and investors alike with its recent financial performance, and the latest data from InvestingPro reinforces this interest. The company's market cap stands strong at $17.95 billion, reflecting its significant presence in the industry. Despite some concerns over its high Price/Earnings (P/E) ratio, which is currently at 75.45, the company's stock has shown a significant return over the past week, with an 8.08% price total return.
Two InvestingPro Tips that stand out for Zebra Technologies include the positive revision of earnings by six analysts for the upcoming period, indicating a bullish sentiment on the company's future performance. Additionally, the stock is currently trading near its 52-week high, at 93.35% of that peak, suggesting that investors have confidence in the stock's current trajectory. With such robust metrics, it's clear that Zebra Technologies has been able to navigate the market effectively.
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