Zebra Technologies (ZBRA 1.60%) shares rose 12.1% on the week to Friday morning, according to data provided by S&P Global Market Intelligence. The move comes after the company's fourth-quarter earnings report encouraged investors to believe the worst might be over for the company.
Zebra Technologies' challenging year
The rise has nothing to do with its recent numbers. Fourth-quarter sales declined by 33%, and full-year sales were down 21%. Moreover, management doesn't see much near-term improvement, with guidance for first-quarter sales to decline by 17% to 20%.
Zebra had a difficult 2023 and is entering 2024 on weak footing for three reasons.
First, its main end markets, e-commerce retailing and logistics, boomed during the lockdowns, and customers are naturally taking a break from the previous heavy investment.
Second, the company is facing a broad-based slowdown in the economy as interest rates slow economic growth.
Third, Zebra's distributors rushed to build inventory as product lead times (the time it takes Zebra to supply products) rose due to supply chain difficulties. Now that end demand is slowing, distributors are focusing on reducing orders.
Image source: Getty Images.
Zebra Technologies could have a better year in 2024
Still, there are some signs of a potential recovery. While management remains cautious, the midpoint of its full-year sales guidance calls for a decline of 1% to growth of 3%, implying a positive result.
Furthermore, the distributor destocking might be over. Management said, "We entered 2024 with distributor inventory levels aligned with recent demand trends." Also, the CFO of its rival Honeywell, Greg Lewis, recently said, "In our Productivity Solutions and Service business, we continue to work through the effects of distributor destocking, but over 30% orders growth in the quarter provides some confidence that we are near the end of that cycle. "Lewis expects the business to end 2024 with a positive growth trajectory.
It bodes well for a recovery in the industry, and that's good news for Zebra Technologies.
