U.S. markets closed
  • S&P 500

    4,255.15
    +7.71 (+0.18%)
     
  • Dow 30

    34,393.75
    -85.85 (-0.25%)
     
  • Nasdaq

    14,174.14
    +104.72 (+0.74%)
     
  • Russell 2000

    2,326.15
    -9.66 (-0.41%)
     
  • Crude Oil

    71.19
    +0.28 (+0.39%)
     
  • Gold

    1,867.70
    -11.90 (-0.63%)
     
  • Silver

    28.00
    -0.15 (-0.54%)
     
  • EUR/USD

    1.2123
    +0.0016 (+0.13%)
     
  • 10-Yr Bond

    1.5010
    +0.0390 (+2.67%)
     
  • GBP/USD

    1.4107
    -0.0010 (-0.07%)
     
  • USD/JPY

    110.0590
    +0.4240 (+0.39%)
     
  • BTC-USD

    40,093.89
    +972.76 (+2.49%)
     
  • CMC Crypto 200

    1,000.23
    +31.39 (+3.24%)
     
  • FTSE 100

    7,146.68
    +12.62 (+0.18%)
     
  • Nikkei 225

    29,161.80
    +213.07 (+0.74%)
     

CommScope (COMM) Up 29.7% Since Last Earnings Report: Can It Continue?

  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
·4 min read
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.

A month has gone by since the last earnings report for CommScope (COMM). Shares have added about 29.7% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is CommScope due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

CommScope Beats on Q3 Earnings Despite Lower Revenues

Despite the coronavirus-induced adversities, CommScope reported relatively modest third-quarter 2020 results, with the top and the bottom lines beating the respective Zacks Consensus Estimate.

Net Loss

On a GAAP basis, net loss in the September quarter was $130.4 million or loss of 66 cents per share compared with net loss of $170.3 million or loss of 88 cents per share in the year-ago quarter. The narrower loss despite top-line contraction was primarily attributable to lower cost of sales.

Adjusted net income came in at $123.1 million or 51 cents per share compared with $126.9 million or 55 cents per share in the prior-year quarter. The bottom line beat the Zacks Consensus Estimate by 12 cents for an earnings surprise of 30.8%.

Revenues

Quarterly net sales fell to $2,168.1 million from $2,380.2 million due to reduced spending from cable operators and wireless carriers, mainly in the Home Networks and Outdoor Wireless Networks segments. Nevertheless, the top line surpassed the consensus estimate of $2,128 million.

Segment Results

Sales in Broadband increased 18.1% to $820.9 million with improved performance across all regions due to higher work-from-home trend and growth in Network Cable & Connectivity and Network & Cloud. The segment’s operating income was $76.7 million against an operating loss of $13 million in the prior-year quarter.

Sales in Home totaled $563.6 million, down 31.8% year over year due to declines in Home Media Solutions. Operating loss was $3.7 million against operating income of $3.8 million in the year-ago quarter.

Sales in Outdoor Wireless came in at $271.8 million, down 18.7% year over year due to declines in Macro Tower Solutions and Metro Cell Solutions. Operating income was $26 million against operating loss of $2.2 million in the year-ago quarter.

Sales in Venue and Campus were $511.8 million, down 2.4% year over year owing to decline in Indoor Copper Enterprise, partially offset by growth in Distributed Coverage and Capacity Solutions and RUCKUS Networks business. Operating loss was $32.2 million compared with loss of $100.5 million in the year-ago quarter.

Other Details

Overall, gross profit improved to $735.5 million from $609.9 million in the year-ago quarter due to lower cost of sales. Total operating expenses were up to $679.7 million from $660.7 million in the prior-year quarter. Operating income was $55.8 million against operating loss of $50.8 million in the prior-year quarter. Adjusted EBITDA was $341.9 million compared with $369.8 million in the year-ago quarter.

Cash Flow & Liquidity

In the first nine months of 2020, CommScope generated $338.5 million of net cash from operating activities compared with $260.4 million in the prior-year period. As of Sep 30, 2020, the company had $582.8 million in cash and cash equivalents with $9,589.3 million of long-term debt. The company had no outstanding debt under its revolving credit facility and had a borrowing capacity of $733.6 million.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended downward during the past month. The consensus estimate has shifted -10.43% due to these changes.

VGM Scores

At this time, CommScope has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise CommScope has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
CommScope Holding Company, Inc. (COMM) : Free Stock Analysis Report
 
To read this article on Zacks.com click here.