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Why Is CommScope (COMM) Up 19% Since Last Earnings Report?

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A month has gone by since the last earnings report for CommScope (COMM). Shares have added about 19% in that time frame, outperforming the S&P 500.

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

CommScope Q4 Earnings Top Estimates, Revenues Miss

CommScope reported mixed fourth-quarter 2020 results, wherein the top line missed the Zacks Consensus Estimate but the bottom line beat the same.

Bottom Line

On a GAAP basis, net income in the December quarter was $9.6 million or 5 cents per share against net loss of $450.5 million or loss of $2.32 per share in the year-ago quarter. The improvement primarily resulted from an operating income.

In 2020, net loss was $629.5 million or loss of $3.20 per share compared with net loss of $973.2 million or loss of $5.02 per share in 2019.

Quarterly adjusted net income came in at $143.8 million or 59 cents per share compared with $106.6 million or 46 cents per share in the prior-year quarter. The bottom line beat the Zacks Consensus Estimate by 14 cents.

Top Line

Quarterly net sales declined 7.3% year over year to $2,131.8 million. This was primarily due to decreases in the Home Networks, and Venue and Campus Networks segments. The top line missed the consensus estimate of $2,199 million.

In 2020, sales inched up 1.1% year over year to $8,435.9 million.

Quarterly Segment Results

Sales in Broadband increased 17.3% year over year to $789.3 million, driven by growth in Network Cable and Connectivity, and Network and Cloud. The segment’s operating income was $104.1 million against operating loss of $145.8 million in the prior-year quarter.

Sales in Home totaled $571 million, down 30.7% year over year due to decline in Home Media Solutions, partly offset by growth in Broadband Connectivity Devices. Operating loss was $8.7 million compared with operating loss of $174.8 million in the year-ago quarter.

Sales in Outdoor Wireless came in at $294.7 million, up 1.1% year over year driven by growth in Macro Tower Solutions, partly offset by declines in Metro Cell Solutions. Operating income was $34.6 million compared with $27.1 million in the year-ago quarter.

Sales in Venue and Campus were $476.8 million, down 6.6% year over year. This was primarily due to declines in Indoor Copper Enterprise and RUCKUS Networks, partly offset by growth in Indoor Fiber Enterprise and Small Cell. Operating loss was $11 million compared with operating loss of $45.7 million in the year-ago quarter.

Other Details

Gross profit declined to $715 million from $736.2 million in the year-ago quarter due to lower sales. Total operating expenses in the quarter decreased to $596 million from $1,075.5 million. Operating income was $119 million against operating loss of $339.3 million in the prior-year quarter. Adjusted EBITDA was $362.2 million compared with $323.6 million a year ago.

The company has announced an initiative, CommScope NEXT. It is a multi-faceted program to drive future growth that outpaces the market, optimize business processes and unlock shareholder value.

Cash Flow & Liquidity

In 2020, CommScope generated $436.2 million of net cash from operations compared with $596.4 million in 2019.

As of Dec 31, 2020, the company had $521.9 million in cash and cash equivalents with $9,488.6 million of long-term debt. This compares with the respective tallies of $598.2 million and $9,800.4 million a year ago. 

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates flatlined during the past month. The consensus estimate has shifted -11.46% due to these changes.

VGM Scores

Currently, CommScope has a nice Growth Score of B, a grade with the same score on the momentum front. Charting a somewhat similar path, 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 A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

CommScope has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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