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Why Is Iridium (IRDM) Down 0.8% Since Last Earnings Report?

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A month has gone by since the last earnings report for Iridium Communications (IRDM - Free Report) . Shares have lost about 0.8% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Iridium 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 catalysts.

Iridium Q3 Loss Meets Estimates, 2021 Outlook Raised

Iridium reported solid third-quarter 2021 results, with the bottom line matching the Zacks Consensus Estimate and the top line surpassing the same. Higher service revenues, subscriber additions, healthy liquidity position, and strong operational momentum on the back of a robust demand environment drove Iridium’s financial performance.

Bottom Line

On a GAAP basis, net loss in the September quarter was $2.1 million or a loss of 2 cents per share compared with a net loss of $4 million or a loss of 3 cents per share in the prior-year quarter. The year-over-year narrower loss was mainly driven by operating profit improvement and lower net interest expenses. The bottom line matched the Zacks Consensus Estimate.

Revenues

Quarterly revenues totaled $162.2 million compared with $151.5 million in the year-ago quarter, mainly driven by strength in subscriber equipment sales and higher service revenues. The top line surpassed the consensus mark of $155 million.

Total service revenues rose 9.3% to $127.8 million from $116.9 million in the year-ago quarter. This was primarily driven by strong revenues from a growing subscriber base. Service revenues contributed 79% to total revenues in the third quarter. Solid performance in broadband, commercial voice and data, and IoT played a contributing role as well.

Subscriber equipment revenues grew 7.1% to $26.9 million from $25.1 million in the year-ago quarter due to its robust demand. However, engineering and support service revenues plunged 20.7% to $7.5 million from $9.4 million in the prior-year quarter, mainly due to the episodic nature of contract work with the U.S. government.

Other Details

Total operating expenses were $147.1 million compared with $138.7 million in the prior-year quarter mainly due to higher selling, general and administrative expenses. Operational EBITDA (OEBITDA) jumped 7.2% to $100.1 million or 61.8% of revenues from $93.4 million or 61.7% of revenues in the third quarter of 2020. The rise was mainly driven by higher revenues.

During the quarter, the company registered 1,690,000 billable subscribers compared with 1,429,000 in the year-ago quarter. The year-over-year increase was backed by growth in commercial IoT customers.

Cash Flow & Liquidity

During the first nine months of 2021, Iridium generated $213.1 million of net cash from operations compared with $179.1 million in the prior-year period. Capital expenditures were $28 million compared with $29.3 million in the year-ago period.

As of Sep 30, the company had $287 million in cash and cash equivalents with $1,584.5 million of net long-term secured debt. As part of the previously announced $300 million share buyback program, the company repurchased nearly 72,000 shares at a total purchase price of $2.6 million.

2021 Guidance Raised

Despite the macroeconomic uncertainties stemming from the pandemic, Iridium has emerged as a strong player on the back of its resilient business model. The company has raised 2021 outlook for total service revenues. It expects service revenues to grow between 5% and 6% compared with the previous outlook of 4-5%. Iridium now expects full-year 2021 OEBITDA to be about $375 million. Prior outlook was within the range of $365-$375 million. Net leverage is anticipated to be below 3.5x OEBITDA at the end of 2022.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates revision. The consensus estimate has shifted -55.56% due to these changes.

VGM Scores

At this time, Iridium 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 C on the value side, putting it in the middle 20% 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.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Iridium has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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