Goldman Sachs Reiterates Neutral Rating, $57 PT on Motorola Solutions Following Management Meeting

In a report published Thursday, Goldman Sachs analyst Simona Jankowski reiterated a Neutral rating and $57.00 price target on

. In the report, Goldman Sachs noted, “The key takeaways from our meeting include: (1) Management remains confident about reaching operating margins of 18% in 2013 (vs. current consensus estimate of 17.4%) and 19% in 2014 (consensus at 18.5%). Most of the 2013 expansion will come from discretionary comp, while 2014 margin expansion is expected to be driven by revenue growth, R&D leverage, annualizing the benefit from recent restructuring actions, and lower pension expense. (2) There is no change to MSI's capital allocation strategy post the recent CFO change. In fact, the $1bn reduction in MSI's pension liability this year as a result of rising rates frees up capital for buybacks and/or incremental debt issuance. (3) While not the current strategy, management appears open to separating the Enterprise and Government businesses, and the synergies between the two appear limited. (4) Following this year's deceleration on difficult comps, MSI expects its Government segment to return to 3-5% growth longer-term. It is experiencing stable ASPs and gross margins, and is encouraged by recent conversations around the LTE opportunity with FirstNet, though opportunities in the Middle East are taking longer to materialize. (5) In the Enterprise segment, MSI believes it has ‘derisked' estimates for 2H13 and is starting to see early signs of traction with its Android-based products, as well as following a July 1 sales reorganization along industry verticals.” Motorola Solutions closed on Wednesday at $57.25.