Zebra Technologies Corp., a leading maker of barcode scanners, witnessed a significant decline in share prices on Tuesday. The company revised its revenue outlook due to the ongoing weak demand trends that show no signs of recovery this year.
Challenging Market Conditions
During the first quarter, Zebra Technologies Corp. observed a general softening in demand, which further accelerated in the second quarter. Chief Executive Bill Burns explained that customers of all sizes across various industries and regions began displaying cautious spending behavior.
Impact on Key Industries
The impact of weakened demand was most evident in the retail and ecommerce sector, as well as in transportation and logistics. Companies operating in these fields have been focusing on absorbing the excess capacity they built during the COVID-19 pandemic.
Share Price Plummets
In response to the disappointing revenue outlook, shares of Zebra Technologies Corp. (ZBRA) experienced a sharp decline of 17.3%, with the stock ending the day at its lowest price since December 28th, 2022. This marks the company’s largest one-day selloff since February 28th, 2022.
Bleak Third-Quarter Sales Expectations
Zebra Technologies Corp. announced that it expects third-quarter sales to plummet between 30% and 35% compared to the previous year. However, analysts’ consensus estimate from FactSet suggests a milder drop of only 4.1%.
Chief Financial Officer Nathan Winters emphasized that this outlook takes into account double-digit declines in all core product categories, with distributor destocking accounting for approximately one-third of the overall decline.
Unfortunately, these challenging trends are anticipated to persist throughout the remainder of the year.
Zebra Faces Challenges in Sales Outlook for 2023
Zebra, a global leader in mobile-computing technology, has revised its sales outlook for 2023 due to a significant reduction in near-term demand and destocking by distributors. The company now anticipates a drop in sales between 20% and 23%, a significant decrease from the initial guidance of 2% to 6% provided in early May.
Jim Burns, the CEO of Zebra, highlighted the uncertain business environment and the company’s cautious assumptions regarding a potential recovery in 2023. This revised outlook reflects the challenging market conditions and limited visibility that Zebra currently faces.
Despite the sales decline, Zebra managed to surpass profit expectations for the second quarter ending on July 1. The company reported a net income of $144 million, or $2.78 per share, compared to a loss of $98 million, or $1.87 per share, during the same period last year. Adjusted earnings per share came in at $3.29, surpassing the average analyst estimate of $3.27.
However, Zebra’s sales for the second quarter fell by 17.3% to $1.21 billion, below the FactSet consensus of $1.31 billion. This decline was partially offset by a decrease in the cost of sales, which fell by 20.3% to $633 million. As a result, Zebra’s gross margin improved to 47.9% from 45.9%.
In the past three months, Zebra’s stock has experienced an 11.4% decline, contrasting with the Technology Select Sector SPDR exchange-traded fund XLK (+0.17%), which saw an 18.4% rally, and the S&P 500, which gained 9.8%.
Despite these challenges, Zebra continues to navigate the complex market landscape, striving to provide innovative mobile-computing solutions to its customers.