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CommScope (COMM) Beats on Q3 Earnings Despite Lower Revenues

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Zacks Equity Research
·4 min read
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Despite the coronavirus-induced adversities, CommScope Holding Company, Inc. COMM 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%.

CommScope Holding Company, Inc. Price, Consensus and EPS Surprise

CommScope Holding Company, Inc. Price, Consensus and EPS Surprise
CommScope Holding Company, Inc. Price, Consensus and EPS Surprise

CommScope Holding Company, Inc. price-consensus-eps-surprise-chart | CommScope Holding Company, Inc. Quote

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.

Zacks Rank & Stocks to Consider

CommScope currently has a Zacks Rank #4 (Sell). Some better-ranked stocks in the broader industry are Viavi Solutions Inc. VIAV, Altice USA, Inc. ATUS and Knowles Corporation KN, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Viavi delivered a positive earnings surprise of 17.5%, on average, in the trailing four quarters.

Altice has a VGM Score of A and has gained 25.8% in the past six months.

Knowles has a long-term earnings growth expectation of 10%. It delivered a positive earnings surprise of 12.5%, on average, in the trailing four quarters.

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CommScope Holding Company, Inc. (COMM) : Free Stock Analysis Report
 
Knowles Corporation (KN) : Free Stock Analysis Report
 
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