U.S. natural gas prices upside likely in 2026 - Morgan Stanley
Introduction & Market Context
Zebra Technologies Corporation (NASDAQ:ZBRA) released its first quarter 2025 results on April 29, showcasing strong performance across all business segments and regions while highlighting growing challenges from U.S. import tariffs. The company’s stock has shown significant volatility, trading at $262.11 in premarket, up 7.65% following the earnings release, after closing at $243.49 the previous day.
The company delivered results exceeding its outlook, demonstrating continued recovery in demand across its diversified business portfolio. This performance comes amid a complex global trade environment, with Zebra actively working to mitigate the impact of increased U.S. import tariffs through supply chain diversification.
Quarterly Performance Highlights
Zebra reported first quarter sales of $1,308 million, representing 11.3% year-over-year growth on a reported basis and 11.9% organic net sales growth. The company achieved significant profitability improvements with adjusted EBITDA margin reaching 22.3%, an increase of 240 basis points year-over-year.
As shown in the following summary of Q1 2025 results:
Non-GAAP diluted earnings per share reached $4.02, up 41.5% compared to the same period last year, reflecting strong operating leverage and excellent execution. The company attributed this significant year-on-year increase in profitability to continued demand recovery and strong operational performance.
The detailed P&L summary reveals strong performance across all business segments and geographic regions:
Notably, the Asset Intelligence & Tracking segment delivered 18.4% organic net sales growth, while Enterprise Visibility & Mobility grew by 8.6%. From a regional perspective, EMEA (Europe, Middle East, and Africa) and Latin America led with 18% organic growth each, followed by Asia Pacific at 13% and North America at 7%.
Detailed Financial Analysis
Zebra’s financial position remains strong, with robust cash flow generation and a healthy balance sheet. The company reported free cash flow of $158 million in Q1, representing a $47 million increase year-over-year. During the quarter, Zebra returned value to shareholders through $125 million in share repurchases.
The company’s liquidity position remains solid with $879 million in cash and cash equivalents and a net debt to adjusted EBITDA ratio of 1.2x, providing significant financial flexibility.
The cash flow and balance sheet highlights demonstrate Zebra’s financial strength:
This strong financial foundation positions Zebra well to navigate the global economic environment. The company highlighted its capital-light business model with a flexible cost structure and its track record of preserving profitability during challenging times. Approximately 80% of Zebra’s sales volume comes through channel partners, and the company targets 100% free cash flow conversion over a business cycle.
Strategic Initiatives
Zebra continues to focus on digitizing and automating the front line of business across various industries. The company’s approach combines purpose-built hardware with software and cloud analytics to deliver real-time actionable insights.
The following diagram illustrates Zebra’s strategic approach to digitization and automation:
This strategy is being applied across multiple end markets, including retail and e-commerce, transportation and logistics, manufacturing, and healthcare. Zebra reported broad-based Q1 sales growth across all these primary vertical end markets.
The company’s solutions are specifically designed to address manufacturers’ biggest challenges, as demonstrated by several customer success stories:
These case studies highlight Zebra’s ability to deliver tangible business outcomes, such as Curtiss-Wright (NYSE:CW)’s 90% reduction in WIP inventory and 85% cut in lead times through an RFID-enabled tracking system, and Bimbo Bakeries’ improved forecasts and minimized waste using an AI-powered demand and planning solution.
Forward-Looking Statements
Despite strong Q1 performance, Zebra faces significant headwinds from increased U.S. import tariffs. The company disclosed that these tariffs are expected to have an approximately $80-90 million annualized gross profit impact, net of mitigation efforts. For full-year 2025, Zebra expects a $70 million gross profit impact, which represents an incremental $50 million from its prior guidance.
The company has made progress in diversifying its global sourcing footprint, reducing U.S. imports from China to approximately 30% from 85% over the last decade. However, the recent tariff increases will have a material impact on near-term profitability.
As shown in the following slide detailing tariff mitigation efforts:
For the second quarter of 2025, Zebra expects sales growth between 4% and 7%, with an adjusted EBITDA margin of approximately 19% and non-GAAP diluted EPS between $3.00 and $3.50. The company anticipates a $25-30 million gross profit net impact from import tariffs in Q2.
For the full year 2025, Zebra provided the following outlook:
The company expects sales growth between 3% and 7%, adjusted EBITDA margin of 20-21%, and non-GAAP diluted EPS of $13.75-$14.75. This represents a downward revision from the $14.75-$15.25 EPS guidance mentioned in previous communications, with the company explicitly stating that the lower profitability expectations are "entirely attributable to increased U.S. import tariffs."
Free cash flow is expected to be at least $700 million for the full year, with capital expenditures between $65-75 million. The company maintains a non-GAAP tax rate of approximately 17%.
Despite these challenges, Zebra remains confident in its ability to navigate the global environment, citing its diversified business model, flexible cost structure, strong balance sheet, and track record of preserving profitability during challenging times. The company continues to invest in innovation and expand its solutions portfolio to address evolving customer needs across its target markets.
Full presentation:
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.