Story URL: http://news.medill.northwestern.edu/chicago/news.aspx?id=221165
Story Retrieval Date: 4/17/2015 11:32:53 AM CST
Zebra Technologies Corp., traditionally focused on barcode and Radio Frequency ID printing and scanning technology, seeks to position its new products at the forefront of the rising trend towards mobile payment systems used in stores, a strategy that has analysts looking positively towards the company’s next year.
Analyst Paul Coster of J.P. Morgan sees potential for Zebra in mobile point-of-sale, which is a catchall term for several technologies that decentralize how customers pay at businesses. Many solutions for mobile POS use handheld printers and Radio Frequency Identification tag scanning – two of Zebra’s specialties – which will soon allow customers to leave their credit cards at home and pay for items with secure RFID units located in their smartphones and other mobile devices.
“We believe macro conditions are improving, and our sense is that retail point-of-sale solutions in North America are ripe for an upgrade cycle, driven by mobile POS,” Coster stated in a research note.
Zebra specializes in barcode and RFID scanning, marking, and tracking. Warehouse product tracing, intended to add efficiency, safety and security to logistics, has long been a central focus of the company. But the Lincolnshire, Ill. firm also produces specialty products for many applications, from retail store scanning and printing, loyalty cards and self-service kiosks to patient and medication control at health care facilities.
According to a report by Javelin Strategy and Research, mobile POS purchases in the U.S. will increase 11-fold by 2018. During a May 4 conference call, Zebra CEO Anders Gustafsson said new products from Zebra, such as wireless receipt printers running the company’s Link-OS operating system, will be appealing to customers looking to untether the payment process from the front counter.
For 2012, the company reported earnings of $123 million, slightly beating average Wall Street estimates of $122 million. Analysts are predicting a 6.7 percent increase in profits to $131 million in 2013.
Zebra’s quarterly earnings beat estimates three times in 2012 and revenues grew in each quarter.
But Zebra’s first-quarter 2013 results of 46 cents per diluted share were below the analysts' average of 63 cents per share.
Analyst Keith Housum of Northcoast Research warned against reading too much into this inconsistency.
“The business is a little bit lumpy,” Housum said. “If a large customer, like Walmart, puts in an order, that can sway the number by a few million dollars. I don’t think you can look too closely at this company quarter to quarter, it’s not a perfectly linear business.”
Investors don’t seem bothered by the discrepancies.
Shares of the company have made a dramatic recovery since hitting an eight-year low of $16.69 in January of 2009, climbing at times sharply to a high of $47.24 in March of 2013. The last year has been steadier, but the stock continues its climb. Over the past two months the price has hovered near the high of its 52-week range of $31.79 to $47.24. Zebra’s market capitalization has passed the $2 billion milestone, currently sitting at $2.3 billion.
Housum said he thinks the valuation of Zebra Technologies is a little high, which he pins on the significant amount of cash on its balance sheet, and the company’s ability to show growth, however uneven. Housum is concerned that without a buyback program or paying a dividend, the stock could go flat over the next year.
Besides solutions for retailers, the company has also made a push to establish itself in the health care industry, and sees this sector as ripe for expansion. The firm’s acquisition of LaserBand, a St. Louis-based laser-printable medical wristband manufacturer in July 2012, has allowed Zebra Tech to expand this technology overseas, and better prepare for changing healthcare legislation in the U.S., including the Electronic Healthcare Records protocol mandated by the Affordable Care Act.
Hospitals are not only tracing patients, but are using barcodes to track medication and other aspects of patient care, which has proven attractive to health care providers trying to increase safety and efficiency.
In an appearance in February on Fox Business television, CEO Gustafsson noted: “Bar-coding in healthcare has been our fastest-growing vertical market over the last several years.”
Pitfalls may exist in the health care market around the Affordable Care Act and federal budget sequestration, but Gustafsson is confident Zebra’s technology has become essential to the industry.
“In order for health care to get to the next level they have to be able to connect the patient with the electronic health records. Barcoding is an absolute necessity to this. This is something where we deliver both value to the patient, as far as patient safety, but also operational efficiency for the healthcare providers.”
Houser said he agreed that object tracking in healthcare is an expanding market that Zebra needs to grow with in order to keep profits rising. He said the acquisition of LaserBand could be good for Zebra. “We haven’t seen the strength of that market yet, though it’s been less than a year,” he said.
Expanding opportunities abroad also offer potential growth for Zebra Tech’s core business of barcode scanners and printers for retailing and logistics. But total international sales were actually down 2.4 percent in 2012. Latin America and North America were the only regions that saw growth, making up for the losses overseas and sending total net sales up 1.3 percent.
“I don’t see anything abnormal about the overseas activities,” Houser said, though he added, “there is a little bit of disappointment” that Zebra has not yet seen as much success in emerging markets as the company hoped, considering that it has made significant investments of personnel and resources overseas in the last few years.