Episode Details

Zebra Technologies Corporation (ZBRA) Q2 2026 — Reported Aug 4, 2026 pre-open for the quarter ENDED JULY 4, 2026. Net sales $1,557M, +20.4% (organic +9.2%). GAAP EPS $4.85; NON-GAAP EPS $6.35 vs ~$4.36 est. FY26 guide raised to $20.75-$21.25. Stock +22.7% to $357.85. Zebra beat by almost two dollars and raised full-year guidance by $2.50 - and the stock ripped 22.7%. But $2.00 of that raise is just the quarter it already reported beating its own guidance; the SECOND HALF went up about fifty cents. And $1.23 of the $6.35 is a one-time tariff refund, with management guiding EBITDA margin from 27.7% back to ~22% next quarter. THE CALL: TRIM (3/5, A GOOD QUARTER AT A PRICE THAT NEEDS A BETTER ONE) — base-case value ~$295.0 vs ~$357.85 today. KEY METRICS: - CALL: TRIM 3/5 - fair value ~$295 vs $357.85 (-18%). Equity DCF on LEVERED FCF at the cost of equity (no debt add-back). Base FCF $970M = the FY26 guide of >$1.0B less the ~$59M after-tax tariff recovery. 5.5% fading to 4%, 2.75% terminal, 10.5% CoE = $293; bear $226, bull $327; 20/50/30 = $295. On 48,129,265 diluted shares (mkt cap $17,222M). - THE PRINT (quarter ENDED JULY 4, 2026 - a 52/53-week year): net sales $1,557M, +20.4% but only +9.2% ORGANIC, vs ~$1,497M est. Gross margin 53.0% vs 47.6%. GAAP EPS $4.85; NON-GAAP EPS $6.35 vs ~$4.36 est. Adj EBITDA $431M (27.7% vs 20.6%). Connected Frontline $903M (+7.5% organic); Asset Visibility & Automation $654M (+11.4%). - THE RAISE IS 80% BACKWARD-LOOKING. On May 12 Zebra guided FY26 to $18.30-$18.70 (mid $18.50) and Q2 to $4.20-$4.50 (mid $4.35); Q1 actual $4.75 - so the OLD implied 2H was $9.40. Today FY goes to $20.75-$21.25 (mid $21.00) and 1H actual is $11.08, so the NEW implied 2H is $9.92. The guide rose $2.50, but $2.00 is just Q2 beating its own midpoint. The forward outlook improved ~50 CENTS. The stock rose 22.7%. - $1.23 OF THE $6.35 IS A TARIFF REFUND. The release discloses IEEPA tariff recoveries of $73M, only $14M received, and credits the 540bp gross-margin jump to those recoveries and FX. $73M at the guided 19% rate = $1.23/sh, ~45% of the $2.74 YoY EPS rise; another ~12 pts is a 6.1% smaller share count. Q3 guide: EBITDA margin ~22% vs 27.7%, EPS $4.70-$4.90 vs $6.35. - BALANCE SHEET + REVERSE TEST: cash $157M vs total debt $2,776M; CURRENT debt jumped to $2,275M from $141M, so working capital is NEGATIVE $1,936M. Goodwill $4,701M > equity $3,435M. H1 FCF $361M vs $568M of buybacks. At $357.85 the equity ($17,222M) needs ~10% FCF growth for 5 years then 2.75% forever - vs 6-8% ORGANIC guidance and a 2.0% revenue CAGR since 2021. STREET: Buy 19/8/0, target raised to ~$365 (+2%). We DIFFER, more CAUTIOUS. What to watch: Bullish: Q3 (Nov) adjusted EBITDA margin at 24%+ vs the ~22% guided moves us to ~$340. Bearish: memory cost inflation hitting FY27 gross margin, or the $2,275M of now-current debt refinancing well above its coupon, takes us to ~$250. Also on YouTube: @ChargedAlpha DISCLAIMER: For informational and educational purposes only. Not financial advice. Do your own research before any investment decision.