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ViaSat (VSAT) Up 20.5% Since Last Earnings Report: Can It Continue?

A month has gone by since the last earnings report for ViaSat (VSAT). Shares have added about 20.5% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is ViaSat 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.

Viasat Miss Earnings and Revenue Estimates in Q3

Viasat reported soft third-quarter fiscal 2023 results, missing the estimates for the bottom and the top line. Declining U.S. fixed broadband subscriber base and high network activation cost for the upcoming ViaSat-3 launch combined with certification delays and supply chain issues hampered the company’s earnings prospect in the December quarter.

Net Income

From continuing operations, Viasat incurred a net loss of $ 42.2 million or a loss of 55 cents per share compared with a net loss of $ 6.6 million or a loss of 9 cents per share in the year-ago quarter. The reduction in net income was driven by greater operational costs, higher interest expenses and significantly higher income tax expense provisions compared with the year-ago quarter’s levels. Adjusted loss for the reported quarter was 61 cents per share, which fell short of the Zacks Consensus Estimate by 26 cents.

Revenues

Revenues from continuous operations witnessed a 4% growth year over as it improved to $651.4 million from $625.3 million in the prior-year quarter. The upside is primarily driven by 10% year-over-year growth in product revenues and marginal growth of 1% in service revenues. In the third quarter, product revenues totaled $249.4 million. Revenues from service amounted to $226.8 million. However, the top line missed the Zacks Consensus Estimate of $673 million.

The Satellite Service witnessed a marginal decline of 2% year over year. It generated $302.4 million in revenues compared with $309.7 million in the prior-year quarter. Expansion in commercial air IFC service and cooperation with Microsoft's Airband initiative to provide Internet connections to 10 million people worldwide supported the segment’s growth. The gains from this segment were offset by a decline in U.S. fixed broadband subscribers. Adjusted EBIDTA dropped by 19% to $90.4 million year over year, mostly due to network activation costs for upcoming ViaSat-3 launches, reduction in U.S. fixed broadband services, declining energy service gross margins, and costs associated with international development.

Commercial Network saw a 20% gain in sales year over year to $167.2 million. Growth in this segment was primarily driven by healthy demand for commercial air IFC terminal orders. VSAT delivered over 240 IFC terminals, a significant jump over the prior-year period’s levels. Energy and satellite products also contributed to this segment. In the December quarter, the company incurred a loss of $19.2 million in terms of Adjusted EBITDA, marking an improvement of 33% year over year. A plunge in research and development costs for satellite payload and ground network development led to the upside.

The Government Systems segment generated $181.8 million in revenues from continuing operations, up 3% year over year. Adjusted EBIDTA from continuing operations increased 15% to $50.9 million due to higher gross margin from the services business that offset higher research and development expenses.

Other Details

During the quarter, Viasat reported an operating loss of $31.3 million compared with an operating loss of $28.7 million in the prior-year quarter. The company incurred higher costs for product and service revenues, leading to higher operating loss year over year. Adjusted EBIDTA in the quarter declined by 15% to $ 138.9 million compared with the year-ago quarter’s figure of $162.8 million. The downside was due to lower revenues from broadband services combined with higher network expenditure for the upcoming launch of ViaSat-3.

Cash Flow & Liquidity

During the third quarter of fiscal 2023, Viasat generated $89 million in operating cash flow compared with $188 million in the year-ago period. As of Dec 31, 2022, cash and cash stand at $182.1 million with $2,899 million of senior notes and other long-term debt.

Outlook

The company expects strong full-year 2023 earnings driven by the Link-16 TDL sale. Due to expected higher expenditures from ViaSat-3 ground network operations and delayed aircraft deliveries, management expects a relatively flat adjusted EBITDA in the coming quarter. For 2024, it anticipates double-digit growth in adjusted EBITDA from continuing operations. Management expects the first quarter of fiscal 2024 to be affected by increased expenditures related to ViaSat-3 launch, ground network expenses and waning demand for fixed broadband services in United States.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended upward during the past month.

The consensus estimate has shifted 2404.42% due to these changes.

VGM Scores

Currently, ViaSat has a subpar Growth Score of D, however its Momentum Score is doing a lot better with an A. Following the exact same course, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

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

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, ViaSat has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

ViaSat belongs to the Zacks Wireless Equipment industry. Another stock from the same industry, Nokia (NOK), has gained 1.7% over the past month. More than a month has passed since the company reported results for the quarter ended December 2022.

Nokia reported revenues of $7.61 billion in the last reported quarter, representing a year-over-year change of +3.7%. EPS of $0.16 for the same period compares with $0.15 a year ago.

Nokia is expected to post earnings of $0.09 per share for the current quarter, representing a year-over-year change of +12.5%. Over the last 30 days, the Zacks Consensus Estimate remained unchanged.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Nokia. Also, the stock has a VGM Score of C.

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