Zebra Holds a Moaty, Wide Portfolio for Logistics Digital Transformation

Equity Analyst

William Kerwin

Revenue segments as reported by the company.

Tangible products

Services and software

Revenue Segments

Gross Profit, Operating Income, and Net Income as a percentage of Revenue

Gross Margin

Operating Margin

Profit Margin

Margins

An operating expense is an expense a business incurs through its normal business operations. Often abbreviated as OPEX.

Selling and marketing

Research and development

General and administrative

Amortization of intangible assets

Acquisition and integration costs

Exit and restructuring costs

Settlement and related costs

Operating Expenses

Year over year growth in Revenue and Operating Expenses.

Revenue Y/Y

OpEx Y/Y

Growth

Shares outstanding refer to a company's stock currently held by all its shareholders, including share blocks held by institutional investors and restricted shares owned by the company's officers and insiders.

Outstanding Shares

Market Cap

Also known as Price/Sales Ratio. Calculated using Average market cap for the quarter / Annualized quarterly revenue.

Revenue Multiple

We see Zebra Technologies as a crucial partner for supply chain, logistics, and operational efficiency for customers across industry verticals. Zebra has acquired and maintained a dominant share position in the automatic identification and data capture, or AIDC, market (inclusive of printing, scanning, and mobile computing) by pivoting into higher-growth technologies over its life. We agree with the firm’s ongoing pivot into software, developing platforms internally and through acquisitions to augment and complement its existing portfolio. 

We think Zebra’s pivot into software will give it access to higher-growth markets, help expand gross margins, and create a stickier overall solution with customers. In our view, the firm already has the most comprehensive AIDC portfolio in the world, which allows it to provide customers with deeply specialized and customized offerings to optimize their workflows. Layering prescriptive software with machine learning and artificial intelligence on top of these solutions allows customers to focus on activities with higher return on investment and creates a stickier solution by further embedding Zebra’s technology in customer processes. We think Zebra’s custom solutions give rise to steep customer switching costs, which underpin our narrow economic moat rating. 

We expect Zebra to benefit from ongoing secular trends toward digitization and automation, notably in omnichannel retail and e-commerce, which have accelerated in recent years, in our view. We think the firm’s highest-growth opportunities will come from further building out its software portfolio and growing its base of recurring revenue, as well as from expanding its footprint in the healthcare market as health records and hospital workflows become digitized. The firm’s balance sheet looks strong to us, and management is now committing capital to bolt-on acquisitions and its heady research and development budget.

Business Strategy & Outlook

We award Zebra Technologies a narrow economic moat rating. We think its customers bear steep switching costs as Zebra’s solutions are deeply embedded in workflows and processes. With its end-to-end portfolio of specialized products and integration of software, we think Zebra’s customers would face monetary cost and significant time investment to switch AIDC vendors, in addition to risking efficiency losses. As such, we think Zebra will be able to earn excess returns on invested capital for the better part of the next decade. 

The AIDC market comprises a family of technologies that identify, verify, record, communicate, and store information. Well-known examples of AIDC technology include bar codes, QR codes, RFID, and biometric scanning; the value that AIDC adds comes from integrating these technologies into workflows to optimize efficiency. AIDC technology is crucial to implementing efficient supply chains and in-store operations, and Zebra primarily serves the retail, transportation logistics, manufacturing, and healthcare markets. 

It is our view that switching costs in enterprise hardware systems typically result from deeply integrated solutions that spread across several touch points of an organization. Zebra has an end-to-end portfolio of specialized AIDC solutions that enables it to achieve a wide footprint within its customers. In fact, among the leading 20 global AIDC providers, Zebra is the only one to offer solutions in each of the five main product categories, per VDC Research: barcode printing, handheld scanners, stationary scanners, RFID, and mobile computers. Zebra solutions typically comprise a combination of these capabilities, all integrated together with proprietary software. In each bucket of Zebra’s portfolio, its products are highly specialized. For example, the firm sells several dozen different mobile computers, among them handheld devices, wearables, tablets, and vehicle-mounted units. Even within each form factor, different computers are designed for different use cases: inventory management, communication, price checking, route optimization, proof of delivery, and self checkout, to name a few. Each customer’s solution set is uniquely tailored by Zebra or a channel partner to fit its business, and having the largest set of specialized tools allows Zebra to provide its customers with the highest degree of customization. 

In collaborating with its customers to build customized systems, Zebra embeds itself deeply in their workflows. If a customer were using a single Zebra barcode printer, it wouldn’t be very difficult to switch vendors. However, when a customer is using a Zebra solution, adopting printers, scanners, and differently customized mobile computers for different parts of the organization to all work seamlessly together, a customer would have to at least partially redesign its system and workflow, and the task becomes much more arduous. Because Zebra has the broadest solution set in the industry, it can plug into more parts of an organization, and create an even more entrenched system--all while increasing customer productivity. A customer looking to switch away from Zebra would incur significant time investment from retraining employees, financial costs from running two systems simultaneously during the transition, and the opportunity cost of halted or slowed productivity as the new system’s kinks are slowly worked out. Additionally, if a customer wanted to replace Zebra, it may have to find multiple vendors to accomplish the same tasks or face limits to its future capabilities. A Zebra replacement might be lacking in printing or RFID ability, for example, which would mean finding multiple vendors to accomplish what Zebra could do by itself. 

Zebra creates an even more integrated--and thus entrenched--system for its customers by layering software on top of its solutions. While Zebra’s hardware forms the arms and legs of a customer’s system--printing and scanning tags--the software, or brain, is what drives the bulk of the efficiency. Zebra has numerous software offerings that integrate into its products, both organically generated or acquired through M&A, that range from mobile device management and security to artificial intelligence and machine learning for prescriptive analytics. The firm’s internally developed Savanna platform stores and organizes the massive amounts of data brought in from a customer’s mobile computers, scanners, and printers, which can then all be fed into Zebra Prescriptive Analytics, which uses machine learning and artificial intelligence to analyze and provide real-time recommendations. For example, in a retail store, an associate could scan an out-of-stock item’s barcode, and ZPA could instantly assign the task of restocking to the closest idle employee to the item’s back-of-store location. While this is a simple example, Zebra’s solutions allow employees to focus uniquely on the highest-ROI activity at any given time. Zebra also has myriad other specialized software solutions to improve efficiency, whether it’s reducing empty space in a delivery truck with Zebra SmartPack or improving in-store communication with Workforce Connect, an internal unified communications solution on Zebra mobile computers. When tailoring a Zebra system to a customer’s needs, the software allows all the hardware to integrate into one cohesive system. Zebra or its channel partners will help orient Zebra software to customers’ exact business needs, and in some cases will help customers write new applications on top of Zebra’s modified Android OS.

In integrating practical software into its hardware solutions, Zebra creates a compelling use case with customers, all while creating a much stickier product. A customer wanting to switch away from Zebra would not only need to redesign workflows around new hardware with different capabilities, but also need to either redesign applications or programs on top of a new vendor’s software, design an in-house solution, or forgo software altogether. All of these alternatives would lead to financial costs, significant time investment in training employees, and steep risks of lower efficiency than was experienced with Zebra.

While competing firms have AIDC software for device management and ad hoc applications, Zebra has shown a commitment to building out advanced machine learning and AI capabilities to extract further efficiency gains at its customers. In our view, Zebra is as of yet unmatched in its software depth in the industry, and we think it will be difficult for competitors to catch up. Zebra consistently outspends its competitors on R&D--both in absolute terms and as a percentage of revenue--and the majority of this budget goes into software, as more than 70% of Zebra’s engineers are software engineers. By our estimates, Honeywell is the only competitor that comes within sniffing distance of Zebra’s hefty R&D budget, and we estimate Zebra outspends Honeywell on AIDC R&D by over $100 million per year. The firm is also pursuing software enhancements externally, with its recent acquisitions being angled toward pure-play software firms—like Reflexis in 2020 for $575 million. 

As one example of Zebra’s value proposition and switching costs, Ford Motor adopted Zebra to reduce excess or obsolete inventory as well as downtime at a manufacturing plant. In lieu of the auto industry’s ubiquitous but paper-based Kanban system, Zebra and Ford codeveloped a new system using Zebra’s real-time locating system to locate parts and bring them to the manufacturing line at the appropriate time. The new system applied wireless tags to each part, as well as fixed-position antennas around the plant, and implemented a central software dashboard to locate any part in a 250,000-square-foot facility within 10 feet of precision. When a line worker’s inventory runs below a certain threshold, he or she simply has to press a button and the system will locate another employee best suited to refresh the inventory based on part location, employee location, and status of the employee’s current workload. The system even works across Ford facilities, with tags tracking parts moving from one facility to the next. Ford credits the new system for saving $500,000 per facility by making it easier to find parts and reducing downtime.

In the case of Ford and other Zebra customers, the value that Zebra adds is in becoming an integrated portion of their internal processes. For Ford, its entire manufacturing plant process is underpinned by Zebra technology, meaning that ripping out Zebra means redesigning the entire process top to bottom. If a customer wanted to switch away from Zebra into another AIDC provider, it would face significant switching costs, including the financial cost of installing a new system, the time spent getting employees up to speed, and the risk of delays or halts in production as a result of fine-tuning a new system. Finally (and perhaps most significantly), a customer would face the risk of a less efficient solution than the incumbent Zebra system.

Narrow

Economic Moat

Zebra Technologies

Zebra Technologies Corp. engages in the design, manufacture, and sale of automatic identification and data capture products. The firm products include mobile computers, barcode scanners, radio frequency identification devices (RFID) readers, specialty printers for barcode labeling and personal identification, real-time location systems, accessories and supplies, such as self-adhesive labels and other consumables, and software utilities and applications. It also provides services such as maintenance, technical support, repair, and managed and professional services, including cloud-based subscriptions. The firm operates through the following two segments: Asset Intelligence & Tracking (AIT) and Enterprise Visibility & Mobility (EVM). The AIT segment consists of barcode and card printing, location solutions, supplies, and services. The EVM segment consists of mobile computing, data capture, and RFID. The company was founded by Edward L. Kaplan and Gerhard Cless in 1969 and is headquartered in Lincolnshire, IL.

Earnings data Q3 2020

Earnings data Q4 2020

Earnings data Q1 2021

Earnings data Q2 2021

Earnings data Q3 2021

Earnings data Q4 2021

Earnings data Q1 2022

Earnings data Q2 2022

Earnings data Q3 2022

Earnings data Q4 2022

Earnings data Q1 2023

Earnings data Q2 2023

Earnings data Q3 2023

Earnings data Q4 2023

Earnings data Q1 2024

Earnings data Q2 2024

Zebra Technologies reports strong Q4 performance amidst market challenges

Zebra Technologies delivered strong financial performance in Q4 2022, driven by sales growth, margin expansion, and strategic investments, positioning the company for continued success.
While facing challenges such as cautious sales outlook and macro uncertainties, Zebra's diversified portfolio and focus on innovation offer resilience and growth potential in the market.
Opportunities in market expansion, partnerships, and industry trends present avenues for Zebra to enhance its market position, capitalize on emerging opportunities, and drive sustainable growth.
With a new CEO set to lead the Enterprise Asset Intelligence vision, Zebra remains confident in its business outlook, aiming to gain market share and navigate challenges effectively.

Zebra Technologies adjusts outlook, focuses on margins and growth opportunities

Zebra Technologies navigated through challenges in Q1 2023 with mixed sales growth, cost management, and a revised outlook, focusing on improving margins and targeting free cash flow.
Despite facing customer order deferrals and softer demand trends, the company is confident in future purchase decisions and anticipates growth in key markets in the second half of the year.
With a strategic focus on managing expenses, implementing price increases, and expanding in growth areas, Zebra Technologies aims to overcome challenges and capitalize on opportunities for sustainable growth.

Zebra Technologies navigates challenges with cost-saving measures and growth opportunities

Zebra Technologies faced a tough Q2 with declining sales and profitability, prompting cost-saving measures and revised outlook for the year.
Despite challenges, the company sees opportunities in specific segments and government demand, aiming for stability and growth in the long term.
Managing inventory risks and focusing on diversification are key strategies to navigate the current market conditions and stabilize operations.
Overall, Zebra Technologies remains resilient, adapting to market dynamics while maintaining a positive outlook for future growth and profitability.

Zebra Technologies faces sales decline but eyes growth opportunities ahead

Zebra Technologies navigated a tough Q3 with sales decline and negative cash flow, but remains focused on cost savings and profitability improvement.
The company's strengths in workflow optimization and innovative solutions position it well for long-term success despite near-term challenges.
Opportunities in health care, manufacturing, and underpenetrated markets offer avenues for growth, while cautious optimism is maintained amidst market uncertainties.

Zebra Technologies adapts to market challenges, eyes growth opportunities

Zebra Technologies navigated challenges in sales decline and margin pressure in Q4 2023, with a cautious outlook for Q1 2024 but positive expectations for full-year 2024 performance.
The company's focus on cost reduction, service, and software segment growth, along with strategic initiatives in underpenetrated markets and technology innovation, positions it for long-term success.
While facing challenges in market recovery and R&D investment, Zebra has opportunities to capitalize on emerging trends, expand market presence, and drive operational efficiency for sustained growth.
Overall, Zebra Technologies' proactive approach to cost management, market expansion, and technology innovation aligns with its long-term growth objectives and commitment to delivering value to customers.

Zebra Technologies reports Q1 sales decline but anticipates recovery

Zebra Technologies faced sales decline in Q1 but improved profitability, with a positive outlook for the full year.
Progress in various sectors and focus on organic growth and strategic acquisitions position the company for recovery.
Challenges include sales decline in Q2 and gradual recovery, with a priority on debt paydown over buybacks.
Opportunities lie in sectors showing signs of recovery, with a focus on automation, traceability, and growth in adjacent markets.

Revenue

Cost of revenue

Gross profit

Operating expenses

SG&A

Other

Operating income

EBITDA

Net income

Earnings per share

Total assets

Current assets

Cash & equivalents

Receivables

Inventory

Non-current assets

Net PPE

Intangibles

Total liabilities

Current liabilities

Short term debt

Income tax payable

Non-current liabilities

Long-term debt

Total equity

Stockholders equity

Minority interest

Total liabilities & equity

Total debt

Net debt

Book value per share

Cash from operations

Funds from operations

Change in working capital

Cash from investing

Capital expenditure

Purchase/sale of investments

Purchase/sale of business

Other sources

Cash from financing

Change in stock

Change in debt

Cash dividends paid

Cash from other sources

Net change in cash

Free cash flow

Zebra Technologies Corp. engages in the design, manufacture, and sale of automatic identification and data capture products. Its products include mobile computers, barcode scanners, radio frequency identification devices readers, specialty printers for barcode labeling and personal identification, real-time location systems, accessories and supplies, such as self-adhesive labels and other consumables, and software utilities and applications. It also provides services such as maintenance, technical support, repair, and managed and professional services, including cloud-based subscriptions. It operates through Asset Intelligence and Tracking and Enterprise Visibility and Mobility segments. The Asset Intelligence and Tracking segment is involved in barcode and card printing, location solutions, supplies, and services. The Enterprise Visibility and Mobility segment focuses on mobile computing, data capture, and RFID. The company was founded by Edward L. Kaplan and Gerhard Cless in 1969 and is headquartered in Lincolnshire, IL.

Cirrus Logic

NVIDIA

QUALCOMM

T-Mobile US

It's a little early to call it a complete recovery, though. Most of these stocks are still trading lower over the last three days.

Trump's Speech Lifted These Tech Stocks on Friday

CalAmp

Criteo

Fortinet

HubSpot

Criteo, CalAmp, Hubspot, Zebra Technologies, and Fortinet were among the losers today.

Why These 5 Tech Stocks All Fell Double Digits Today

A selloff from highs earlier in the year may represent a buying opportunity for steady growth and reasonable valuation.

Zebra Technologies: Scan The Barcode To Buy The Dip

The company's mitigation efforts against Chinese trade tariffs will be completed this summer.

Zebra Technologies Can Handle Its Chinese Supply-Chain Issues

Zebra Technologies Corporation (ZBRA) CEO Anders Gustafsson on Q4 2019 Results - Earnings Call Transcript

Sales and earnings miss estimates, and growth looks a little light.

Why Zebra Technologies Stock Just Sank 7%

Zebra (ZBRA) delivered earnings and revenue surprises of -2.47% and -0.33%, respectively, for the quarter ended December 2019. Do the numbers hold clues to what lies ahead for the stock?

Zebra Technologies (ZBRA) Lags Q4 Earnings and Revenue Estimates

Zebra (ZBRA) doesn't possess the right combination of the two key ingredients for a likely earnings beat in its upcoming report. Get prepared with the key expectations.

Zebra Technologies (ZBRA) Earnings Expected to Grow: What to Know Ahead of Next Week's Release

Rockwell Automation

Raytheon

Stryker

The global robotics market is expected to see a CAGR of 25% between 2019 and 2024 on increased human and machine interaction.

Robotics to Take Centerstage in 2020: 5 Stocks in Focus

Live Nation

STERIS

Zebra Technologies and TripAdvisor are worth a closer look, but not just because the S&P 500 index updated its list.

The S&P 500 Just Swapped Out 3 Companies. Should Investors Buy on the News?

Zebra Technologies is based in the U.S., and manufactures and sells printing devices and technologies like barcode machines and label printers.

What Has Zebra Technologies’ Stock Swelled 30% In Value Since Late October?

ABB Ltd.

Cognex

Dassault Systemes SE

Deere & Company

KION Group AG

Long-term investors should consider these robotics-related companies.

7 Top Robotics Stocks to Buy in January

Allegion

Crown Hlds

Cintas

Dover

General Electric

HEICO

Leidos Hld

TransDigm

Teledyne Technologies

A look back at what stocks worked in the industrial sector last year and which of them could do well in 2020.

These Were the 10 Best Industrial Stocks of 2019

The S&P 500 index SPX, +0.01% will have some new members in 2020, after S&P Dow Jones Indices announced a shuffle set to take place just before Christmas.

Live Nation, Zebra and Steris to join S&P 500, TripAdvisor among companies dropped

Danaher

Ingersoll-Rand

Johnson Controls

A rundown of what investments worked in the sector in 2019, plus commentary on their prospects in 2020.

The 10 Best Performing Large Cap Manufacturing Stocks of 2019

Zebra Technologies Corporation (NASDAQ: ZBRA), a company that manufactures and sells AIDC (Automatic Identification and Data Capture) products, including: mobile computers, barcode scanners, RFID (radio frequency identification device) readers, specialty printers for barcode labeling and.

Explaining The 25% Rally In Zebra Technologies’ Stock And What To Expect Going Forward

The data management expert posted fantastic earnings in the third quarter, paired with the signing of the largest contract in company history.

How Zebra Technologies Shares Gained 15% in October

Zebra Technologies' (ZBRA) Cortexica Vision Systems buyout is expected to strengthen its Enterprise Asset Intelligence vision.

Zebra Technologies Boosts Portfolio With Cortexica Buyout

First Republic

W.W. Grainger

Jacobs Engineering Group

According to GuruFocus list of 52-week highs , these Guru stocks have reached their 52-Week Highs.

Five Companies Hit 52-Week Highs

Zebra Technologies: Tailwinds Continue

Call it a mixed quarter if you like, but the data management expert delivered solid results where it matters most.

Zebra Technologies' Q3 in Black and White: 19% Earnings Growth

Zebra Technologies Corporation (ZBRA) CEO Anders Gustafsson on Q3 2019 Results - Earnings Call Transcript

Zebra (ZBRA) delivered earnings and revenue surprises of 4.26% and -0.89%, respectively, for the quarter ended September 2019. Do the numbers hold clues to what lies ahead for the stock?

Zebra Technologies (ZBRA) Beats Q3 Earnings Estimates

Zebra Technologies, a maker of enterprise asset-tracking systems, crushed Wall Street's earnings target for the third quarter, but its sales were a tad light. Its guidance was upbeat.

Zebra Technologies Beats Q3 Earnings Target, Guides Higher

Here's a list of robotics stocks for long-term investors who want to think outside the box.

News for Zebra Technologies Stock (ZBRA)