Why Zebra Technologies Stock Fell 9.8% Today

What happened

Shares of Zebra Technologies (ZBRA 4.23%) closed Tuesday's trading 9.8% lower, falling back after showing pre-market gains of as much as 9.6%. The maker of barcode scanning tools and other information management systems posted strong second-quarter results before the market opened Tuesday. However, its early surge evaporated as analysts and investors decided that management's guidance targets for Q3 weren't up to par.

So what

Zebra's sales rose 6.6% year over year in the second quarter, landing at $1.47 billion. Adjusted earnings per diluted share rose from $4.57 to $4.61. The average Wall Street analyst had been looking for earnings near $4.21 per share and revenues in the neighborhood of $1.44 billion.

Looking ahead to the third quarter, Zebra's management set its sights on year-over-year sales growth of approximately 3% with an adjusted earnings target range centered around $4.50 per share. For the period, analysts' current consensus estimates point to earnings of roughly $5.08 per share.

Now what

Zebra is battling the same global challenges as everyone else, but this company is approaching shipping issues and component shortages from a slightly unusual angle. Instead of pushing every ounce of extra cost over to its clients in the form of higher product prices, Zebra has only raised its prices slightly, accepting that its higher expenses will cut into its profit margins.

Personally, I'm impressed by Zebra's ability to deliver revenue growth and generous profits in this challenging  macroeconomic environment. A company that provides the tools and services other businesses use to manage their supply chains turns out to be good at supply chain management. Who would've thought, right?

The stock has dropped by 44% in 2022, but over the past five years, Zebra investors are still enjoying a market-crushing return of 220%. Zebra shares are now changing hands at 17 times forward earnings estimates, down from 36 times estimates at the start of the year. I'm sorely tempted to pick up a few shares for myself at these prices.