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Why Is Iridium (IRDM) Down 16.5% Since Last Earnings Report?

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It has been about a month since the last earnings report for Iridium Communications (IRDM - Free Report) . Shares have lost about 16.5% 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 the most recent earnings report in order to get a better handle on the important drivers.

Iridium Q1 Earnings Beat Estimates, Revenues Up Y/Y

Iridium reported first-quarter 2022 earnings of 2 cents per share, beating the Zacks Consensus Estimate of a loss of 1 cent. The company reported a loss of 4 cents in the prior-year quarter.

Quarterly revenues of $168.2 million, increasing 15% from the year-ago quarter’s levels. The upside can be attributed to strength in subscriber equipment sales and higher service revenues. The top line surpassed the consensus mark by 7.6%.

Total service revenues rose 9% year over year to $126.1 million. The upside can be attributed to strong revenues from a growing subscriber base. Service revenues contributed 75% to total revenues in the first quarter. Solid performance in broadband, commercial voice and data and IoT also played a contributing role.

Subscriber equipment revenues rose 41% year over year to $33.7 million due to its higher demand. Engineering and support service revenues, up 30% to $8.4 million from the prior-year quarter’s levels, mainly due to the increases in commercial activity and the episodic nature of contract work with the U.S. government.

Other Details

Total operating expenses were $149 million, up 8.3% from the prior-year quarter, mainly due to higher cost of subscriber equipment sales, selling, general and administrative and cost of services. Operational EBITDA (OEBITDA) rose 15% year over year to $103.2 million. The upside was mainly driven by higher revenues.

Operating income came in at $19.2 million compared with $9 million reported in the year-ago quarter.

As of Mar 31, 2022, the company had 1,781,000 billable subscribers, up 17% compared with 1,518,000 at the end of the prior-year quarter. The year-over-year increase was backed by growth in commercial voice and data, IoT data and broadband service customers.

As of Mar 31, the company had $232 million in cash and cash equivalents with $1.4 billion of net debt. Capital expenditures were $13.6 million in the quarter under review.

In the quarter under review, the company repurchased 3.8 million shares worth $134.2 million. On Mar 7, 2022, Iridium’s board of directors approved a new share repurchase authorization of an additional $300 million through Dec 31, 2023. As of Mar 31, 2022, the company had $302.5 million under its repurchase authorization.

2022 Guidance Reiterated

Iridium commercial service revenues are expected to benefit from growth in IoT, ongoing activations and solid uptake of the company’s broadband services.

The company expects service revenues to increase between 5% and 7% in 2022. Iridium now expects full-year 2022 OEBITDA between $400 million and $410 million.

 

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates review.

The consensus estimate has shifted 66.67% due to these changes.

VGM Scores

At this time, Iridium has a strong 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 C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. 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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