Earnings Preview: Motorola

Motorola (MOT) is expected to report Q2 earnings before market open Thursday, July 31, with a conference call scheduled for 8:00 am ET.

Guidance

The consensus estimate is for an EPS loss of 3c and $7.69B for revenue, according to First Call. The consensus EPS range is quite large, at a loss of 1c to a loss of 12c. Guidance provided on the last earnings call was for Q2 EPS of -2c to -4c.

Analyst Views

Kaufman said that reflecting weakness in the mobile devices market in Q2 as well as the company's continuing efforts to turn the business around, it believes Q2 results for the Mobile Devices business is apt to be weaker than anticipated. The firm is projecting Motorola shipped 28M units, versus consensus of 27M, with ASP declining 3% QoQ to $117.

Kaufman suspects units shipped could come below these expectations given the softness reported by some of the company's competitors, though it notes Nokia's (NOK) estimates of Q2 industry volume of 303M units is not far off its estimate of 306M units. Kaufman anticipates Motorola suffered further share erosion in the quarter. Net, Kaufman expects the Mobile Devices business to report revenues of $3.3B and to post an operating loss of $346M, versus consensus revenues of $3.2B and an operating loss of $336M. It continues to have a positive view of Motorola's Home and Networks Mobility business.

Kaufman's estimates for revenues and operating income for Q2 are $2.6B and $208M, respectively, both figures above street estimates of $2.5B and $188M. While the wireless infrastructure business continues to face challenges, Kaufman believes the Connected Home business is benefiting from positive demand from cable operators for network and customer premises equipment.

Lastly, the Enterprise Mobility unit continues to benefit from positive demand trends in government & public safety. The segment calls for Q2 revenues and operating income totaling $1.9B and $309M, respectively. Kaufman's estimates compare with consensus expectations of $2.0B and $281M. Kaufman believes the risks to its outlook are to the downside. The firm is projecting Q3 revenues to reach $8.1B and 5c in EPS. Consensus for Q3 is lower at $7.85B and 1c.