Zebra Technologies (ZBRA 0.75%) isn't back to growth mode yet, but the company is showing signs that the worst is behind it.
Shares of the bar code scanner and inventory management tech company jumped as high as 16.6% on Thursday and were trading up 11.5% as of 11:15 a.m. ET after fourth-quarter earnings topped Wall Street expectations.
A slow return to normal
Zebra investors have been on a wild ride in recent years. The company was among the pandemic highfliers, as e-commerce vendors flush with cash and racing to keep up with demand invested heavily in updating warehouses and supply chains.
But that spending spree was short-lived, and last year Zebra ran into problems with slowing sales and distributors working to sell off excess inventory.
The last quarter of 2023 was largely more of the same, but there are signs that conditions are getting back to normal. Zebra earned $1.71 per share on revenue of $1.01 billion, beating the consensus estimate of $1.66 per share on $1 billion in sales.
Net sales were down 32.9% for the quarter, and net income was down 91%. But the company did increase the expected benefit of a previously announced cost-cutting campaign to $120 million in annual savings, from $100 million, and said that work was largely complete heading into 2024.
"As expected, our fourth quarter results continued to be impacted by broad-based softness across our end markets and distributor destocking," CEO Bill Burns, who has only been on the job since last March, said in a statement. "We realized sequential improvement in sales, profitability and free cash flow through demand improvement, restructuring actions and inventory management initiatives."
NASDAQ: ZBRA
Key Data Points
Is Zebra Technologies a buy after the stronger-than-expected earnings report?
Burns said that the company heads into 2024 believing distributor inventories are finally aligned with current demand. End markets will not recover overnight, however. The company expects 2024 revenue to be down slightly to up 3% compared to 2023.
"Although we are seeing some improvement in order activity, we are not yet seeing signs of a broad market recovery," the CEO said.
Zebra shares are likely to be stuck in neutral until end markets are ready to grow again. But the quarterly results should go a long way toward easing investor concerns about the business and the relatively new CEO.
The long-term trend toward warehouse automation remains intact, and as the post-pandemic business cycle smooths, Zebra should be able to provide reliable growth over time. But investors buying in today need to be focused on years, not quarters, and to show patience in the meantime.
