ZBRA - Zebra Technologies stock sinks 19% on disappointing outlook amid weak demand

2023-08-01 11:26:08 ET

Zebra Technologies ( NASDAQ: ZBRA ) stock sank 18.6% on Tuesday as the company issued Q3 guidance well below expectations and slashed its FY net sales outlook amid weakening demand and cautious customer spending.

The stock, which fell 3. 8% YTD, plunged as much as 2 0.6% to $244.67/share, its lowest level in over seven months.

Q2 adjusted EPS was $3.29 vs. $4.61 in Q2 2022, but in line with $3.28 consensus as profit margin was higher than expected. Revenue declined 17.3% Y/Y to $1.21B, missing $1.31B consensus.

"Q2 results were impacted by softening demand and more cautious customer spending, particularly in retail and logistics end markets, and by distributor destocking," said CEO Bill Burns.

Zebra Tech ( ZBRA ) expects Q3 adjusted EPS of $0.60-$1.00, well below $3.79 consensus . Net sales are projected to decline 30%-35% Y/Y to $895.7M-$964.6M, compared with $1.33B consensus.

The firm forecast FY23 net sales of $4.45B-$4.62B, down 20%-23% Y/Y, compared with $5.50B consensus. Prior outlook was 2%-6% decline.

It expects free cash flow to be positive for H2 FY23, but negative for the full year. This reflects lower profitability, elevated inventory and higher cash taxes, and is inclusive of $180M of expected settlement payments.

Zebra Tech ( ZBRA ) expanded the scope of its Productivity Plan and initiated a Voluntary Retirement Plan to generate more cost efficiencies. Total charges from these actions are expected to be ~$105M, up from $25M reported in Q1. Annualized cost savings are now expected to total ~$85M, of which $65M is incremental.

Recent analysis - Zebra Technologies: Good Company Amid Temporary Headwinds

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