Cogent (CCOI) Q3 Loss Wider Than Expected Despite Higher Revenues
Cogent Communications Holdings, Inc.’s CCOI third-quarter 2023 bottom and top lines missed the respective Zacks Consensus Estimate. However, the Washington, DC-based leading Internet service provider witnessed a solid top-line improvement year over year, driven by the commercial expansion of its NetCentric business.
Bottom Line
Net loss in the September quarter was $56.7 million or a loss of $1.20 per share compared with a loss of $8 million or a loss of 17 cents per share in the prior-year quarter. The year-over-year decline, despite top-line growth, was primarily due to higher operating expenses and higher depreciation and amortization charges. Non-GAAP loss in the reported quarter was $1.13 per share, wider than the Zacks Consensus Estimate of a loss of 87 cents.
Cogent Communications Holdings, Inc. Price, Consensus and EPS Surprise
Cogent Communications Holdings, Inc. price-consensus-eps-surprise-chart | Cogent Communications Holdings, Inc. Quote
Revenues
Quarterly Service revenues increased to $275.4 million from $150 million in the year-ago quarter, driven by higher Off-net revenues. The top line missed the consensus estimate of $281 million.
On-net revenues in the reported quarter increased to $130 million from $113.2 million in the year-ago quarter. On-net customer connections increased 8.5% year over year to 89,623. Net-centric business experienced healthy demand, driven by continued growth in video, traffic and streaming. The company’s Net-centric customer connections improved to 62,291 from 51,145 a year ago.
Off-net revenues increased 257.7% year over year to $131 million, primarily due to the acquisition of the wireline business of Sprint.
Other Details
GAAP gross profit was $15.1 million, down 78.4% year over year for margins of 5.5% and 46.6%, respectively. Operating loss was $50.6 million against an operating income of $28.1 million. EBITDA totaled $43.6 million compared with $57.9 million in the year-ago quarter for respective margins of 15.8% and 38.6%. The year-over-year decline was due to Sprint acquisition costs. Cogent increased its dividend for the 48th consecutive quarter. It raised its quarterly dividend by 1 cent per share to 95.5 cents.
Cash Flow & Liquidity
In the first nine months of 2023, Cogent generated $66 million from operating activities compared with $137.4 million in the prior-year period. As of Sep 30, 2023, the company had $109.7 million in cash and cash equivalents with $419.9 million of finance lease obligations (net of current maturities).
Zacks Rank & Stocks to Consider
Cogent currently has a Zacks Rank #3 (Hold).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Arista Networks, Inc. ANET, carrying a Zacks Rank #2 (Buy), is likely to benefit from strong momentum and diversification across its top verticals and product lines. The company has a software-driven, data-centric approach to help customers build their cloud architecture and enhance their cloud experience. Arista has a long-term earnings growth expectation of 20.4% and delivered an earnings surprise of 12%, on average, in the trailing four quarters.
It holds a leadership position in 100-gigabit Ethernet switching share in port for the high-speed datacenter segment. Arista is increasingly gaining market traction in 200- and 400-gig high-performance switching products and remains well-positioned for healthy growth in data-driven cloud networking business with proactive platforms and predictive operations.
United States Cellular Corporation USM, sporting a Zacks Rank #1, is the fourth largest full-service wireless carrier in the United States. The company provides a range of wireless products and services, and a high-quality network to increase the competitiveness of local businesses and improve efficiency of government operations.
U.S. Cellular has taken concrete steps to accelerate subscriber additions and improve churn management. The company aims to offer the best wireless experience to customers by providing superior quality network and national coverage. It is well-positioned to support the investment required for network enhancements, including the deployment of 5G technology. The company is well-positioned for continued demand for broadband.
Comtech Telecommunications Corp. CMTL, carrying a Zacks Rank #2, is another solid pick. Headquartered in Melville, NY, the company is a leading global provider of next-generation 911 emergency systems and secure wireless communications technologies to commercial and government customers.
Comtech’s key satellite earth station modems incorporate forward error correction and bandwidth compression technologies, which enable its customers to optimize their satellite networks by either reducing their satellite transponder lease costs or increasing data.
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