Yahoo Finance CommScope (COMM) Q1 Earnings Beat, Revenues Lag Estimates
CommScope Holding Company, Inc. COMM reported mixed first-quarter 2023 results, with the bottom line beating the Zacks Consensus Estimate but the top line missing the same. Despite solid execution in the face of supply chain issues and high input costs combined with substantial growth in the Networking, Intelligent Cellular and Security Solutions (NICS) segment, revenues declined year over year.
Bottom Line
On a GAAP basis, the net loss in the March quarter was $11.7 million or a loss of 6 cents per share compared with a net loss of $154.4 million or a loss of 75 cents per share in the year-ago quarter. Despite the top-line contraction, lower cost of sales and operating expenses aided the company’s first-quarter 2023 earnings.
Non-GAAP net income came in at $88.9 million or 35 cents per share compared with $64.4 million or 26 cents per share in the prior-year quarter. The bottom line beat the consensus estimate by a penny.
CommScope Holding Company, Inc. Price, Consensus and EPS Surprise
CommScope Holding Company, Inc. price-consensus-eps-surprise-chart | CommScope Holding Company, Inc. Quote
Revenues
Revenues in the reported quarter were $2,001.5 million, down 10.2% year over year. The downside was largely due to soft performance in Connectivity and Cable Solutions (CCS), Access Network Solutions (ANS) and Outdoor Wireless Networks (OWN) segments, partially offset by higher revenues from NICS. The top line missed the consensus estimate by $148 million.
Sales in CCS were down 1.8% to $822.8 million as higher revenues from network cabling and conductivity were more than offset by a decline in net sales from the building and data center conductivity product line.
Sales from the OWN segment were $258.4 million, down 33.8% year over year due to lower spending and customer inventory adjustments in North America. Sales in NICS increased 51.3% to $284.5 million due to growth in Ruckus Networks and strong execution in an adverse supply environment.
Sales in ANS totaled $298.7 million, down 5.7% year over year due to lower volumes owing to project timing. Sales from the Home Networks business declined to $337.1 million from $495.7 million in the year-ago quarter. The sluggish demand and decline in Broadband Home Solutions and Home Media Solutions led to a 32% fall in net sales year over year.
Region-wise, revenues from the United States declined 2.2% to $1,318 million. Europe, the Middle East and Africa also witnessed a 19.7% top-line contraction year over year to $326.5 million. Asia Pacific revenues were $158.9 million, down 21.9%. Caribbean and Latin American revenues fell 33.5% to 107.9 million and revenues from Canada were $90.2 million, down 17.6%.
Other Details
Gross profit improved to $691.7 million from $636.3 million in the year-ago quarter due to lower cost of sales. Total operating expenses decreased to $539.2 million from $609.5 million in the year-ago quarter. Operating income totaled $152.5 million compared with $26.8 million a year ago. Non-GAAP adjusted EBITDA was $312 million compared with $253.3 million in the year-ago quarter.
Cash Flow & Liquidity
In the first quarter of 2023, CommScope utilized $46.1 million cash for operating activities compared with a cash utilization of $14.6 million in the prior-year period. As of Mar 31, 2023, the company had $327.3 million in cash and cash equivalents with 9,410.5 million long-term debt. The company had no outstanding debt under its asset-based revolving credit facility and had a borrowing capacity of $908.8 million.
Outlook
Core adjusted EBITDA for 2023 is expected in the range of $1.35–$1.5 billion. Management expects CommScope NEXT initiatives to give the business a solid foundation to continue expanding and adding value. However, a challenging macroeconomic environment, inflationary pressures and uncertain business conditions are likely to have softened demand for its products, with certain customers reducing purchases to right-size their inventories and others pausing capital spending.
CommScope currently has a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Key Picks
Headquartered in Raleigh, NC, Bandwidth Inc. BAND operates as a Communications Platform-as-a-Service (CPaaS) provider, offering avant-garde software application programming interfaces for voice and messaging services. It is the only application programming interface (API) platform provider that owns a Tier 1 network with enhanced network capacity, primarily catering to business enterprises.
Bandwidth, carrying a Zacks Rank #2 (Buy), has a long-term earnings growth expectation of 25% and delivered an earnings surprise of 342%, on average, in the trailing four quarters. It enables enterprises to rapidly scale communications functionalities to a vast range of applications and devices with its easy-to-use software APIs. As a leading provider of a cloud-based communications platform, Bandwidth benefits from cost-effective operations.
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IHS Holding Limited IHS, carrying a Zacks Rank #2, is another key pick. Based in London, the United Kingdom, it is one of the largest independent owners, operators, and developers of shared communications infrastructure in the world by tower count.
IHS Holding has more than 39,000 towers across its 11 markets: Brazil, Cameroon, Colombia, Egypt, Kuwait, Nigeria, Peru, Rwanda, South Africa and Zambia. The stock has gained 60.7% in the past six months.
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