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Motorola Solutions Inc MSI

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Morningstar’s Analysis

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Motorola Solutions Continues Broad-Based Growth and Withstands Cost Headwinds, but Shares Still Rich

Analyst Note

| William Kerwin |

We are raising our fair value estimate for narrow-moat Motorola Solutions to $185 per share, from $175, after the firm reported third-quarter results above our expectations and raised guidance for the rest of the year. We think Motorola is benefiting from strong large-deal demand for its land mobile radios, and are especially impressed with its margin performance despite ongoing supply constraints and logistical cost headwinds. We also think the quarter again exemplified the upside Motorola earns--both in terms of sales and profitability--from its budding video and software businesses, which we expect to drive growth and margin expansion over the long term. Still, we think the firm’s current valuation is out of reach, and that the market is baking in a greater mix shift toward these businesses (still only 21% of sales) than we think is feasible. We recommend investors wait for a pullback.

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Company Profile

Business Description

Motorola Solutions is a leading provider of communications and analytics, primarily serving public safety departments as well as schools, hospitals, and businesses. The bulk of the firm’s revenue comes from sales of land mobile radios and radio network infrastructure, but the firm also sells surveillance equipment and dispatch software. Seventy-five percent of Motorola’s revenue comes from government agencies, while 25% comes from its commercial customers. Motorola has customers in over 100 countries and in every state in the United States.

500 West Monroe Street, Suite 4400
Chicago, IL, 60661
T +1 847 576-5000
Sector Technology
Industry Communication Equipment
Most Recent Earnings Sep 30, 2021
Fiscal Year End Dec 31, 2021
Stock Type Cyclical
Employees 18,000