It has been about a month since the last earnings report for Cogent Communications (CCOI - Free Report) . Shares have lost about 15.6% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Cogent due for a breakout? 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.
Cogent Misses Earnings & Revenue Estimates in Q2
Cogent reported unimpressive second-quarter 2020 results, with the top and the bottom line missing the respective Zacks Consensus Estimate.
Net income in the June-end quarter was $8.6 million or 18 cents per share compared with $7.1 million or 16 cents per share in the year-ago quarter. The bottom line missed the Zacks Consensus Estimate by 5 cents.
Quarterly service revenues increased 4.6% year over year to $141 million. On a constant-currency basis, revenues increased 5.1% year over year. However, the top line lagged the consensus estimate of $143 million.
On-net revenues increased to $103.8 million from $97.5 million in the year-ago quarter. On-net service is provided to customers located in buildings that are physically connected to Cogent’s network by its facilities. The number of on-net buildings increased by 117 year over year to 2,854 as of Jun 30.
Off-net revenues slipped to $37 million from $37.2 million in the year-ago quarter. Off-net customers are located in buildings directly connected to the company’s network using other carriers’ facilities.
Total operating expenses were $113.6 million compared with $113 million in the prior-year quarter. Operating income was $27.6 million compared with $22 million in the year-ago quarter. Adjusted EBITDA totaled $53.6 million compared with $47.3 million in the year-ago quarter for a margin of 38% and 35.1%, respectively.
Despite the COVID-19 pandemic, Cogent increased its dividend for the 32nd consecutive quarter. It hiked dividend by 2.5 cents per share to 70.5 cents for third-quarter 2020. The amount is payable on Sep 4 to shareholders on record as of Aug 21.
Cash Flow & Liquidity
In the first half of 2020, Cogent generated $69.8 million of net cash from operating activities compared with $69.3 million in the year-ago period. As of Jun 30, the company had $417 million in cash and cash equivalents with $189 million of finance lease obligations.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended downward during the past month. The consensus estimate has shifted -12.71% due to these changes.
At this time, Cogent has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% 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.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Cogent has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.