CommScope (COMM) Beats on Q3 Earnings Despite Lower Revenues

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-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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