Zebra Technologies: A Stock Worth Considering?

Zebra Technologies Corporation's (ZBRA) shares have seen a remarkable growth of 42.7% year-to-date, significantly outperforming the industry average and the broader Industrial Products sector, which grew by 40.5% and 9.6%, respectively. This strong performance positions Zebra Technologies ahead of competitors like John Bean Technologies Corporation (JBT), which returned 28.1%, and Honeywell International Inc. (HON), which only managed 8.3% over the same period.

ZBRA's Performance Compared to Peers

As of the last trading session, ZBRA closed at $390.65. This price is slightly below its 52-week high of $413.44, yet represents a significant increase from its 52-week low of $233.95.

Zebra Technologies excels as a global provider of enterprise asset intelligence solutions. It is benefiting from its robust position and improving market dynamics in the automatic identification and data capture solutions sector. The company is successfully broadening its product offerings beyond core areas like manufacturing and retail, capturing market share in public sector, healthcare, e-commerce, and various industrial markets.

Key Growth Drivers for Zebra

The Enterprise Visibility & Mobility segment of Zebra Technologies is currently experiencing strong momentum. The increasing adoption of its mobile computing and data capture solutions is driven by an uptick in investments by customers to enhance technological capabilities across supply chains. This segment's performance has been bolstered by a 33.7% year-over-year increase in revenues during the third quarter of 2024.

Additionally, the Asset Intelligence & Tracking segment is gaining traction, supported by a rebound in demand for printing solutions and radio frequency identification devices. This segment's revenue rose by 26.5% on a year-over-year basis in the same quarter.

Zebra Technologies continues to enhance its digital capabilities and optimize its supply chain while expanding its data analytics abilities. The company has focused on marketing strategies to better connect with customers. As a result of these initiatives and a modest recovery in overall market demand, Zebra forecasts fourth-quarter 2024 net sales to rise by 28-31% compared to the previous year.

The company’s commitment to cost-management strategies has also enabled a 3.9% reduction in total operating expenses in the third quarter. Zebra completed its 2022 productivity plan and voluntary retirement program, impacting more than 9% of its workforce, which is expected to yield annual cost savings of around $120 million.

So far, Zebra Technologies has achieved $110 million in net savings, with $50 million in savings recorded in 2023 and another $60 million in the first nine months of 2024. These savings are anticipated to enhance its margins and allow for further investments in organic growth.

Moreover, ZBRA is dedicated to returning value to its shareholders through dividends and stock buybacks. The company spent $16 million on share repurchases in the first nine months of 2024, compared to $52 million in the same period in 2023. Zebra Technologies has $877 million remaining under its current share repurchase program. Although its free cash flow was negative in 2023, the company expects it to reach at least $850 million in 2024, supporting its shareholder-friendly actions.

Solid Revenue Projections

The Zacks Consensus Estimate suggests that Zebra’s revenues will reach $5 billion and $5.3 billion in 2024 and 2025, respectively, showcasing year-over-year growth of 8.1% and 5.9%.

Enhanced Returns and Valuation

Zebra Technologies boasts a trailing 12-month return on equity (ROE) of 18%, which exceeds the industry average of 14.3%, demonstrating its efficient use of shareholder funds. Similarly, its return on assets is 7.83%, significantly higher than the industry average of 6.56%, indicating that Zebra is effectively utilizing its assets to generate returns.

With a forward 12-month price-to-earnings ratio of 24.52, ZBRA appears attractively valued compared to the industry average of 25.68. Additionally, it is more affordable than its peer, Cognex Corporation (CGNX), which is perceived as overvalued relative to the industry standards.

Positive Earnings Forecasts

Recently, earnings projections for Zebra Technologies have shown upward momentum. Estimates for 2024 have increased by 10.6% to $14.04 per share, while 2025 estimates have risen by 5.3% to $15.97 per share. This suggests impressive year-over-year growth of 43% and 13.7% for the years 2024 and 2025, respectively.

Is ZBRA a Good Buy Now?

With solid performance across various end markets, a robust product portfolio, a focus on advancing data analytics capabilities, and ongoing cost-saving measures, Zebra Technologies seems poised for strong growth in the upcoming quarters.

Given its favorable valuation compared to the industry and its competitors, along with strong earnings projections, ZBRA is well-positioned to offer sustained growth and value for its shareholders. Investors may consider adding Zebra Technologies to their portfolio, especially as it currently holds a Zacks Rank #1 (Strong Buy).

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