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Ubiquiti (UBNT) Up 18.8% Since Last Earnings Report: Can It Continue?

Zacks Equity Research
SL Green (SLG) delivered FFO and revenue surprises of 0.00% and 4.61%, respectively, for the quarter ended September 2018. Do the numbers hold clues to what lies ahead for the stock?

It has been about a month since the last earnings report for Ubiquiti Networks (UBNT). Shares have added about 18.8% in that time frame, outperforming the S&P 500.

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

Ubiquiti Surpasses Q4 Earnings and Revenue Estimates

Ubiquiti reported healthy fourth-quarter fiscal 2018 results, wherein both the top line and the bottom line topped the respective Zacks Consensus Estimate.

Net Income

GAAP net income for the fiscal fourth quarter was $70.1 million or 94 cents per share compared with $60.7 million or 74 cents per share in the prior-year quarter primarily due to higher revenues. Net income for fiscal 2018 decreased to $196.3 million or $2.51 per share from $257.5 million or $3.09 per share in the prior fiscal owing to higher income tax provision.

Non-GAAP net income for the reported quarter came in at $74.8 million or $1.01 per share compared with $61 million or 75 cents per share a year ago. The bottom line beat the Zacks Consensus Estimate by 3 cents.

Revenues

Quarterly revenues increased 18% year over year to $269.8 million. Also, the top line surpassed the Zacks Consensus Estimate of $242 million. Fiscal 2018 revenues increased 17.5% year over year to $1,016.9 million.

Other Quarter Details

Quarterly gross profit increased to $120.5 million from $103.2 million in the year-ago quarter. Gross margin decreased to 44.7% from 45.1% as the company incurred higher-than-normal shipping expenses to expedite the delivery of products. Total operating expenses were $32.4 million compared with $31.5 million in the year-earlier quarter. Income from operations improved to $88.1 million from $71.7 million. By product type, revenues from Service Provider Technology were $105.9 million compared with $114.7 million in the year-ago quarter. Enterprise Technology revenues were $163.8 million compared with $114 million a year ago.

Cash Flow and Liquidity

Ubiquiti generated $332 million as cash from operating activities in fiscal 2018 compared with $112 million in fiscal 2017. As of Jun 30, 2018, the company had cash and cash equivalents of $666.7 million with long-term debt of $460.4 million compared with respective tallies of $604.2 million and $241.8 million a year ago. Ubiquiti repurchased 7,162,312 shares of common stock at an average price of $62.13 per share in fiscal 2018.

Fiscal 2019 Outlook

Ubiquiti has provided guidance for fiscal 2019 based on the recent demand environment in its end markets. The company expects to generate revenues between $1.1 billion and $1.2 billion and earnings per share (EPS) of $4.00-$4.80 in fiscal 2019. However, if the new proposed tariffs for certain products imported into the United States from China are implemented, the low-end of EPS may decline to $3.65 or lower.

How Have Estimates Been Moving Since Then?

Analysts were quiet during the last two month period as none of them issued any earnings estimate revisions.

VGM Scores

At this time, Ubiquiti has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. Following the exact same course, the stock was allocated a grade of F on the value side, putting it in the fifth quintile for this investment strategy.

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

Outlook

Ubiquiti has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.



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