CommScope Holding Company, Inc. COMM reported mixed first-quarter 2019 results wherein both adjusted earnings and revenues surpassed the respective Zacks Consensus Estimate, but decreased year over year.
On a GAAP basis, net loss for the quarter was $2.3 million or loss of 1 cent per share against net income of $33.7 million or 17 cents per share in the year-ago quarter. The deterioration was primarily attributable to lower revenues and higher operating expenses.
Non-GAAP adjusted earnings came in at 48 cents per share compared with 49 cents per share in the prior-year quarter. The bottom line exceeded the Zacks Consensus Estimate of 44 cents.
CommScope Holding Company, Inc. Price, Consensus and EPS Surprise
CommScope Holding Company, Inc. Price, Consensus and EPS Surprise | CommScope Holding Company, Inc. Quote
Quarterly net sales decreased 1.9% year over year to $1,099.5 million as growth in the United States was more than offset by decline in sales in the Asia-Pacific region and EMEA (Europe, Middle East and Africa). The top line, however, beat the consensus estimate of $1,076 million. Sales were driven by the build out of 4G networks, partly offset by decline in indoor copper. Also, changes in foreign exchange rates adversely impacted sales by about 2%.
Operating income declined to $90.7 million from $103.7 million in the year-ago quarter owing to reduction in certain selling prices. Non-GAAP adjusted operating income was $190.7 million compared with $188.6 million in the year-ago quarter owing to favorable product and geographic sales mix.
Connectivity Solutions revenues were down 4.1% year over year to $646.1 million, primarily due to softness in demand in Asia Pacific and EMEA regions, partly offset by a slight increase in North America. Non-GAAP adjusted operating income decreased 12.1% to $95.5 million owing to reduction in certain selling prices and the impact of unfavorable foreign exchange rates on costs.
Revenues from Mobility Solutions came in at $453.4 million, up 1.5% year over year, amid strong demand in North America. Non-GAAP adjusted operating income increased 19.1% to $95.2 million, benefiting from higher sales volumes and favorable geographic mix.
Cash Flow & Liquidity
During the first quarter, CommScope utilized $10 million of cash from operations against cash generation of $35.2 million in the year-ago quarter. As of Mar 31, 2019, the wireless and broadband network technology company had $176.4 million in cash and equivalents with $7,459.6 million of long-term debt.
For second-quarter 2019, CommScope expects revenues between $2.490 billion and $2.650 billion. Operating loss of $124-$170 million and non-GAAP adjusted EBITDA of $365-$405 million is expected. It estimates loss per share of $1.21-$1.44, based on 196 million shares and non-GAAP adjusted EPS of 54-62 cents.
CommScope is optimizing its excellent customer relationships and market position as communication service providers continue to build out their networks to increase capacity and coverage. Moreover, the company has acquired ARRIS on Apr 4, 2019 and is presently working to combine ARRIS and Ruckus for long-term growth. CommScope is poised to benefit from favorable networking market trends, while securing shareholder value.
Zacks Rank & Other Stocks to Consider
CommScope currently sports a Zacks Rank #1 (Strong Buy). A few other top-ranked stocks in the broader industry are T-Mobile US, Inc. TMUS, Harris Corp. HRS and Juniper Networks, Inc. JNPR, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
T-Mobile has long-term earnings growth expectation of 15.1%.
Harris has long-term earnings growth expectation of 8%.
Juniper has long-term earnings growth expectation of 6.2%.
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