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Cogent (CCOI) Q4 Loss Narrower Than Expected, Top Line Up Y/Y

Cogent Communications Holdings, Inc. CCOI reported mixed fourth-quarter 2023 results, with the bottom line surpassing the Zacks Consensus Estimate but the top line missing the same. However, the Washington, DC-based leading Internet service provider reported a top-line expansion year over year, driven by solid demand trends in Corporate and NetCentric business.

Net Income

The company reported a net income of $200.2 million or $4.17 per share compared with $851 million or 2 cents per share in the year ago quarter. Despite higher operating expenses, the gain on the bargain purchase of Sprint business led to an improvement in the net income. Adjusted net income was reported at 16 cents per share. The bottom line beat the Zacks Consensus Estimate by 79 cents.

In 2023, net income was $1.27 billion or $26.62 per share compared with $5.1 million or 11 cents in 2022. The improvement is driven by gain on the bargain purchase of Sprint assets.

Cogent Communications Holdings, Inc. Price, Consensus and EPS Surprise

Cogent Communications Holdings, Inc. price-consensus-eps-surprise-chart | Cogent Communications Holdings, Inc. Quote

Revenues

Service revenues rose to $272.1 million from $152 million in the year-earlier quarter, backed by solid growth in Off-Net revenues. However, the top line missed the consensus estimate of $276 million.

In 2023, the company reported service revenues of $940.9 million compared with $599.6 million in 2022.

On-Net revenues during the quarter were $141.2 million, up from $115 million in the year-ago quarter. The top line beat our estimate of $133.5 million. On-Net customer connections improved 7.9% year over year to 88,733. The Net-centric business experienced healthy demand, driven by continued growth in video, traffic and streaming. The company’s Net-centric customer connections improved to 62,370 from 51,670 a year ago.

Off-Net revenues were $123.7 million compared with $36.9 million in the year-earlier quarter. Off-Net customer connections increased to 36,895 from 13,531 in the year-ago quarter. Net sales fell short of our revenue estimate of $128.9 million.

Other Details

GAAP gross profit was $29.7 million, down 58.4 % year over year for margins of 10.9% and 47%, respectively. Operating loss was $68.5 million against an operating income of $27.3 million a year ago. EBITDA totaled $6 million compared with $57.1 million in the year-ago quarter for respective margins of 2.2% and 37.6%. Cogent raised its quarterly dividend by a penny to 96.5 cents for the first quarter of 2024. This is the 46th consecutive quarterly dividend increase from the company.

Cash Flow & Liquidity

In 2023, Cogent generated $17.3 million from operating activities compared with $173.37 million in 2022. As of Dec 31, 2023, the company had $75.1 million in cash and cash equivalents with $419.9 million of finance lease obligations (net of current maturities) compared to respective figures of $223.8 million and $287 million in 2022.

Zacks Rank & Stocks to Consider

Cogent currently has a Zacks Rank #3 (Hold).

NVIDIA Corporation NVDA, currently sporting a Zacks Rank #1 (Strong Buy), delivered a trailing four-quarter average earnings surprise of 20.18%. In the last reported quarter, it delivered an earnings surprise of 13.41%. You can see the complete list of today’s Zacks #1 Rank stocks here.

NVIDIA is the worldwide leader in visual computing technologies and the inventor of the graphic processing unit. Over the years, the company’s focus evolved from PC graphics to AI-based solutions that support high-performance computing, gaming and virtual reality platforms.

InterDigital, Inc. IDCC, carrying a Zacks Rank #2 (Buy) at present, delivered a trailing four-quarter average earnings surprise of 170.50%. In the last reported quarter, it delivered an earnings surprise of 16.53%.

IDCC is a pioneer in advanced mobile technologies that enable wireless communications and capabilities. The company engages in designing and developing a wide range of advanced technology solutions, which are used in digital cellular as well as wireless 3G, 4G and IEEE 802-related products and networks.

Arista Networks, Inc. ANET, carrying a Zacks Rank #2 at present, is likely to benefit from strong momentum and diversification across its top verticals and product lines. The company has a software-driven, data-centric approach to help customers build their cloud architecture and enhance their cloud experience. Arista has delivered an earnings surprise of 13.28%, on average, in the trailing four quarters.

The company holds a leadership position in 100-gigabit Ethernet switching share in port for the high-speed data center segment. It is increasingly gaining market traction in 200 and 400-gig high-performance switching products and remains well-positioned for healthy growth in the data-driven cloud networking business with proactive platforms and predictive operations.

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