Bar-code scanning and data management expert Zebra Technologies (NASDAQ:ZBRA) reported fourth-quarter results early Thursday morning. The company's supply chain is under pressure due to Chinese-American trade tensions and the mitigation efforts have not been completed quite yet.

Zebra Technologies's fourth-quarter results by the numbers

Metric

Q4 2019

Q4 2018

Change

Analyst Consensus

Revenue

$1.19 billion

$1.14 billion

4.4%

$1.20 billion

GAAP net income

$169 million

$115 million

47%

N/A

Adjusted earnings per share (diluted)

$3.56

$3.10

15%

$3.65

Data source: Zebra Technologies. GAAP = generally accepted accounting principles.

Zebra's hardware sales rose 4% year over year to $1.04 billion while service and software revenue jumped 10% higher, landing at $153 million.

The company has traditionally manufactured most of its bar code printers and mobile computers in China, and these products are subject to the Trump administration's trade tariffs when entering America. Zebra has mitigated most of these tariff costs by moving the production of certain hardware models into other countries in Southeast Asia such as Vietnam and Malaysia. Bar code scanners for the American market are now being made in Mexico and Taiwan. By the middle of 2020, management expects to have worked around the entire tariff impact, which stopped at $10 million in the fourth quarter.

Coronavirus effects

The company is also evaluating the coronavirus scare as the disease spreads in China and elsewhere. It had no effect on the fourth quarter, which closed its books at the end of 2019. The top-line impact on Zebra's first-quarter sales should land between zero and $50 million.

On the earnings call, CFO Olivier Leonetti explained that even the worst-case scenario should work out to nothing more than some delays in Zebra's supply chain.

"We do not believe that the coronavirus outbreak, as we understand its potential impact today, will have a material impact on our full-year outlook," Leonetti said. "We believe the risk to be mainly in the timing of order fulfillment in near-term."

Thus, sales should grow approximately 5% in fiscal year 2020 alongside widening operating margins.

A zebra standing in a golden brown savanna. Its stripes are actually a bar code, digits and all.

Image source: Getty Images.

Straight from the pinstriped horse's mouth

In a phone interview with the Fool, Zebra CEO Anders Gustafsson explained how Chinese-American trade tensions reduced the company's sales by pushing potential customers out of China.

"We started to see some manufacturing customers exiting China to migrate to other Southeast Asian countries," Gustafsson said. "China is 5% of our total revenue today."

Gustafsson remains excited about Zebra's growth prospects in the long run, especially when the trade issues have run their course.

"We have some strong secular tailwinds that are helping us, like the on-demand economy, healthcare digitizing more of their operations, our overall enterprise asset intelligence position," he said.

Don't call it a comeback

Investors backed away from Zebra's modest misses against Wall Street's earnings and revenue targets, driving share prices 7% lower by the end of Thursday's trading session. The stock still beat the market over the last year, delivering a 27% gain in 52 weeks. That's a slowdown from the rapid gains in 2017 and 2018, which combined to nearly triple Zebra's share prices in three years.

I know it sounds strange to call it a rebound opportunity when Zebra is already outperforming the broader market, but the stock looks spring-loaded to post dramatically stronger sales and profits once the China-based market uncertainty is resolved. The stock should follow suit.