Zebra Technologies (NASDAQ: ZBRA) reported Q4 EPS of $3.56, $0.09 worse than the analyst estimate of $3.65. Revenue for the quarter came in at $1.19 billion versus the consensus estimate of $1.2 billion.

Fourth-Quarter Financial Highlights

• Net sales of $1,192 million; year-over-year growth of 4.8%
• Net income of $169 million and net income per diluted share of $3.10; year-over-year increases of 47.0% and 46.9%, respectively
• Non-GAAP diluted EPS increased 14.8% year-over-year to $3.56
• Adjusted EBITDA increased 6.3% year-over-year to $255 million

“In the fourth quarter, solid sales growth in our North America and EMEA regions was partially offset by a continued softer spending environment in China. Earnings per share were at the low end of our guidance range due to tariff expenses and a higher mix of large year-end budget orders, each of which impacted gross margin,” said Anders Gustafsson, Chief Executive Officer of Zebra Technologies. “We entered 2020 with a strong order backlog and our pipeline of opportunities is solid. Our core portfolio offering continues to resonate well in the market. At the same time, we are making good progress broadening our role as a solutions provider, investing in capabilities that digitize and automate our customers’ enterprise operations.”

GUIDANCE:

Zebra Technologies sees Q1 2020 EPS of $2.90-$3.10, versus the consensus of $3.01.

Outlook

Our outlook for the first quarter and full year 2020, without taking into account the full potential impact of the coronavirus outbreak in China, is set forth below. See the text below under the caption “Anticipated Impact of Coronavirus Outbreak” for a discussion of the possible impact of the outbreak on the company’s results of operations.

First Quarter 2020

• The company expects first-quarter 2020 net sales to increase approximately 4% to 7% from the first quarter of 2019. This expectation includes an approximately 1 percentage point additive impact from acquisitions, and an approximately 1 percentage point negative impact from foreign currency translation.
• Adjusted EBITDA margin is expected to be approximately 20% for the first quarter of 2020, which includes an approximately $10 million net incremental cost of sales attributable to Section 301 List 4 tariffs and approximately $4 million of additional freight expense related to the coronavirus outbreak. Non-GAAP earnings per diluted share are expected to be in the range of $2.90 to $3.10. This assumes an adjusted effective tax rate of approximately 16%.

Full Year 2020

• The company expects full-year 2020 net sales to increase approximately 4% to 6% from 2019. This expectation includes an approximately 30 basis point positive impact from acquisitions, and an approximately 1 percentage point negative impact from foreign currency translation.
• Adjusted EBITDA margin is expected to be slightly higher than 22% for the full-year 2020, favorable to 2019 despite a net impact to cost of sales from the Section 301 List 4 tariffs of approximately $15 million in the first half of 2020.
• For the full-year 2020, the company expects to generate free cash flow of at least $700 million.
• As previously stated, the company is diversifying the sourcing of most of its U.S. volumes out of China. These actions are expected to result in up to an additional $25 million of one-time pre-tax charges through mid-2020, plus an estimated $10-15 million of capital expenditures.

For earnings history and earnings-related data on Zebra Technologies (ZBRA) click here.