Msi Body Cams


One of Motorola's body-worn cameras in action. Photo: Motorola Solutions.

What: Shares of Motorola Solutions (NYSE:MSI) fell as much as 10.4% Wednesday morning, weighed down by soft guidance for the fourth quarter.

So what: The just-released results from the third quarter were solid enough:

  • Sales decreased by 1% year over year to $1.42 billion, mostly due to a 4% currency exchange headwind.
  • Adjusted earnings from continuing operations came in 32% higher at $0.82 per share.
  • Analysts nailed the revenue result, but would have settled for earnings near $0.73 per share.

Looking ahead, Motorola's management expects fourth-quarter earnings of roughly $1.48 per share and 7% lower sales compared to the equivalent period of fiscal year 2014. Analysts are currently looking for earnings closer to $1.57 per share on a relatively flat sales trend, so the company is likely to fall far short of these analyst forecasts.

Now what: Motorola's North American sales grew by 5%, driven by strong demand from all levels of government clients. The company's forte these days lies in robust walkie-talkie systems, law enforcement body cameras, and other tools popular with local, state, and federal government operations.

The weak fourth-quarter view was primarily based on continued currency-related challenges and general turmoil in Latin America, which is delaying expected orders from south of the border on top of lower-value sales in weakening local currencies.

A lot of the company's sales abroad are actually conducted directly in U.S. dollars, which removes some of the currency translation effect but also raises the cost of equipment and services from the local client's perspective. Thus, many potential orders are being pushed back, in search of a less expensive deal.

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

Motorola is adjusting its pricing policies in many overseas markets in order to adjust to this difficult currency environment, but lowering prices will cut into Motorola's operating margins. We'll have to wait and see where the company draws that sensitive line in the sand.

"Our business showed resilience in the third quarter despite a mixed global economic environment and significant currency headwinds," said Motorola Solutions CEO Greg Brown in a press statement.

Motorola is not alone, of course. Fellow communications specialist and major government contractor Harris (NYSE:HRS) also reported results last night, with similarly strong earnings and less-impressive sales. That company kept its forward guidance a bit closer to market expectations, however, and Harris shares never dipped more than 1.7% on Wednesday.

Anders Bylund has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.