Why Zebra Technologies Stock Stumbled Today

Core Insights - Zebra Technologies reported third-quarter results that exceeded Wall Street expectations, with sales rising 4.8% year over year to $1.32 billion and adjusted earnings per share of $3.88, surpassing the consensus of $3.73 [1] - Despite strong results, Zebra's stock fell by 15.8% due to concerns over the sustainability of future growth, particularly influenced by the recent acquisition of Elo Touch Solutions [1][2] Financial Performance - The company's sales growth of 4.8% was above the average analyst expectation of $1.31 billion, while adjusted earnings per share of $3.88 exceeded the consensus estimate [1] - The fourth-quarter guidance provided by management also surpassed current analyst views, but it heavily relies on the Elo acquisition, which adds $8 billion to Zebra's addressable market [2] Guidance Analysis - When excluding the expected $100 million in revenues from Elo, the year-over-year growth rate for the fourth quarter drops from 9.5% to just 1%, which is significantly below the Street's consensus estimate of 6.2% [3] - The guidance appears optimistic but is misleading as it incorporates contributions from the Elo acquisition, which may not be reflected in most analyst forecasts [2][3] Market Conditions - CEO Bill Burns indicated that the impact of tariffs on costs was minimal, adding only $8 million to the bottom line, but noted that a shaky economy is leading to reduced orders from clients facing budget constraints [6] - Some clients have accelerated their orders into the third quarter, resulting in a diminished order pipeline for the upcoming period [6] Demand Outlook - The company anticipates organic revenue growth of about 6% and organic earnings growth of 16% for the year, excluding the acquisition [7] - Overall, the demand outlook remains stable, but there is significant pressure on Zebra's order books, indicating potential challenges ahead [8]