Why Zebra Technologies Stock Fell 16% on Tuesday

What happened

Shares of Zebra Technologies (ZBRA -15.86%) closed Tuesday’s trading session 15.9% lower. The maker of barcode scanners and information management tools reported third-quarter results early in the morning, falling short of analyst estimates and Zebra’s guidance targets across the board.

So what

Zebra had expected top-line sales to rise approximately 3% year over year to $1.48 billion. Adjusted earnings were targeted at roughly $4.50 per diluted share. The consensus analyst view aligned almost exactly with the midpoint of Zebra’s guidance.

However, the company saw revenues fall 4% to $1.38 million. Adjusted earnings dropped 10% lower, landing at $4.12 per share.

CEO Anders Gustafsson explained that demand and order backlogs were strong, but a shortage of crucial semiconductor components held back product deliveries again. Furthermore, a new shipping center in the Chicago area started taking over Zebra’s product distribution services from the existing hub in Texas, but the transition has not been smooth. To ease the pain, the Texas center remains staffed nearly to full capacity until further notice.

These shipping-process snags also reduced Zebra’s ability to fulfill customer orders.

Now what

The third quarter wasn’t all bad news. Zebra was able to reduce its reliance on premium-priced air shipping of heavy printers, putting more of the finished goods on sea routes instead. Further improvements should follow in the fourth quarter and the next fiscal year.

The company continued to buy back shares during this quarter, reducing the outstanding shares by a total market worth of $687 million over the last four quarters. On a phone call with The Motley Fool, Gustafsson affirmed that buybacks look tremendously valuable to Zebra in this environment, given the healthy order pipeline.

Zebra’s stock price has now decreased by 59.2% in 2022, trading at prices not seen since the spring of 2020. In my eyes, this discount looks like a tempting buying opportunity.

Anders Bylund has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Zebra Technologies. The Motley Fool has a disclosure policy.

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