Q3 Earnings Preview for CommScope (NasdaqGS:COMM)

in EARNINGS/INVESTING IDEAS by

CommScope Holding Company, Inc. (NasdaqGS:COMM) is scheduled to report Q3 earnings results before markets open for trading on November 5, 2020.

The company is expected to report earnings of $0.37/share on revenue of $2.128 billion. The consensus earnings per share (EPS) of $0.37/share is based on a poll of 14 analysts and represents a decline in eps of −32.2% over the same quarter last year, when the company reported earnings of $0.55/share.

The revenue forecast of $2.128 billion based on a poll of 11 analysts implies a year-over-year (YoY) decline in revenue of −10.6%. Last year the company reported $2.38 billion in revenue for the quarter.

Expected to report EPS contraction of −32.2% for Q3, 2020
Metric Expected Prior Year YoY Change
Revenue $2,127.73 $2,380.20 −10.6%
EPS $0.37 $0.55 −32.2%

Earnings Call Trends

Historically, management has exceeded analyst expectations 7 out of the last 8 tracked quarters, and missed expectations 1 quarter.

What are your expectations from CommScope Holding Company, Inc. for earnings this quarter? Let us know in the comments!

Analyst Expected vs. Reported EPS
Quarter Expected Reported Surprise Result
Q2, 2020 $0.19 $0.32 71.1% Beat
Q1, 2020 $0.08 $0.12 52.6% Beat
Q4, 2019 $0.34 $0.46 36.9% Beat
Q3, 2019 $0.44 $0.55 25.2% Beat
Q2, 2019 $0.57 $0.66 16.0% Beat
Q1, 2019 $0.44 $0.48 8.5% Beat
Q4, 2018 $0.43 $0.51 17.9% Beat
Q3, 2018 $0.66 $0.59 −10.6% Missed

In the following table, we summarize the company’s stock price movements after earnings releases. The “Price Day Prior” column shows the closing stock price on the day before the earnings report, and the “Price Next Day” column shows the stock price at the end of the trading day after the earnings report. After the last earnings report for the period ending June 30, 2020, the stock price reacted by increasing 16.2%.

Stock Price Performance After Earnings
Report Date Price Day Prior Price Next Day Change % Result
August 6, 2020 $9.48 $11.02 16.2% Increase
May 7, 2020 $10.20 $11.18 9.6% Increase
February 20, 2020 $14.49 $12.62 −12.9% Decline
November 7, 2019 $11.75 $15.70 33.6% Increase

The other question to consider is one of earnings manipulation. There is a lot of pressure on management each quarter to deliver on earnings expectations. The Beneish M-Score is a statistical model that provides some insight into whether the company might be manipulating earnings. With a Beneish M-Score of −3.25, the model suggests that the company is not likely to be an earnings manipulator. A value of −3.25 implies a 0.1% chance of earnings manipulation.

Fundamentals And Technical Analysis

CommScope Holding Company, Inc. is currently trading at $8.90/share, up 0.6% for the day. The company is trading at approximately 56.4% of its 52-week high of $15.79/share. The company’s stock price is down −19.2% since the last earnings report and down −7.1% over the previous week. The company’s 14 Day Relative Price Index (RSI) of 43.11 suggests the company is trading in technically neutral territory. The RSI is considered overbought when above 70 and oversold when below 30.


NasdaqGS:COMM Stock Price Chart
Source: Finbox

The current share price implies a price-to-earnings (P/E) multiple of −1.55 and a forward P/E multiple of 5.79.

CommScope Holding Company, Inc.’s current share price also implies a price-to-book (P/B) multiple of 5.84. The following table summarizes some other key fundamental ratios:

Data as of November 1, 2020
Metric Value
Last Reported Fiscal Period Key FY2020.Q2
Period End Date June 30, 2020
Stock Price (Current) $8.90
P/E Ratio −1.6x
P/E Ratio (Fwd) 5.8x
PEG Ratio 0.0
Total Debt / Total Capital 78.6%
Levered Free Cash Flow $920.5 million
EV / EBITDA 12.0x

Finbox

CommScope Holding Company, Inc. is a small-cap stock with a market capitalization of $1.752 billion and a total enterprise value of $12.138 billion. The company operates in the Information Technology sector and the Communications Equipment industry.

CommScope Holding Company, Inc. provides infrastructure solutions for communications and entertainment networks worldwide. The company’s Connectivity segment offers fiber optic, copper cable, and connectivity solutions for use in data centers, business enterprises, telecommunications, cable television, and residential broadband networks. Its Mobility segment provides building blocks for cellular base station sites and related connectivity; indoor, small cell, and distributed antenna wireless systems; and wireless network backhaul planning and optimization solutions. The company’s Customer Premises Equipment segment provides subscriber-based solutions that support broadband and video applications connecting cable, telecommunications, and satellite service providers. This segment offers devices that provide residential connectivity to service provider’s network, such as digital subscriber line, cable modems, and telephony and data gateways that incorporate routing and Wi-Fi functionality. It also provides set top boxes that support cable, satellite, and IPTV content delivery, as well as digital video recorders, high definition set top boxes, and hybrid set top devices. Its Network & Cloud Segment offers cable modem termination systems, video infrastructure, distribution and transmission equipment, and cloud solutions that enable facility-based service providers to construct residential and metro distribution network. The company’s Ruckus segment provides converged wired and wireless networks for enterprises and service providers. This segment offers indoor and outdoor Wi-Fi and LTE access points, access, and aggregation switches; IoT suite, and on-premises and cloud-based control and management systems; and software and software-as-a-service applications for security, location, reporting, and analytics. The company was formerly known as Cedar I Holding Company, Inc. CommScope Holding Company, Inc. was founded in 1976 and is headquartered in Hickory, North Carolina.

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