Zebra Technologies Sees Revenue Growth Amid Tariff Challenges

Zebra Technologies reported an 11% revenue increase and 42% EPS growth in Q1, exceeding expectations. Despite anticipated tariff impacts of $30M in Q2, the company showcases its agile supply chain to mitigate risks. Investors should weigh these factors as they assess stock viability.

Date: 04-05-2025

AI Rating: 8

**Financial Performance and Tariff Impacts**
Zebra Technologies has shown a robust performance in its first-quarter results, with revenues increasing by 11% year over year and earnings per share (EPS) showing significant growth of 42%. This performance exceeds Wall Street expectations and indicates strong operational capabilities and market demand for Zebra's services.

In facing new tariff expenses, Zebra's management anticipates direct tariff costs of approximately $30 million in the second quarter and $70 million for the full fiscal year. These anticipated costs represent about 10% of the adjusted EBITDA for the next quarter, which stands at $292 million. Over the fiscal year of 2024, the total will reduce to around 7%, suggesting that while these costs may pose a challenge, Zebra has positioned itself to handle them without significant detriment to overall profitability. As per their management's estimates, the impact on profit margins will lessen further in the second half of the year.

**Supply Chain Advantages**
Zebra's proactive measures during the COVID-19 pandemic have allowed them to diversify their supply chain, shifting a significant reduction of shipment reliance from China (from 85% to 30% expected by the end of Q2). This diversification should continue to be advantageous as it minimizes risks associated with tariffs imposed on imports. The company also expressed that, while some components will still need to be sourced from China, its ability to manufacture products in countries like Vietnam offers a buffer against excessive tariff exposure.

**Market Sentiment and Stock Valuation**
The stock is trading down 34% over the last three months, valued at just 13 times free cash flows. Market sentiment appears pessimistic, with broader fears surrounding tariff expenses impacting its price disproportionately. The expectation of stable revenue growth, combined with a manageable tariff impact, seems to provide a buying opportunity for investors seeking growth in data-tracking services and technology manufacturing.

Overall, Zebra's combination of strong earnings growth, solid management strategies to mitigate tariff exposure, and a diversified supply chain paints a positive outlook. Investors might consider the stock for its long-term growth potential, especially in the data analysis and logistics sectors. However, attention to tariff-related cost impacts remains crucial.

Stocks: ZBRA