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NETGEAR, Inc. (NTGR) Up 3.1% Since Last Earnings Report: Can It Continue?
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It has been about a month since the last earnings report for NETGEAR, Inc. (NTGR - Free Report) . Shares have added about 3.1% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is NETGEAR, Inc. due for a pullback? 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.
NETGEAR Q3 Earnings Beat Estimates, Revenues Fall Y/Y
NETGEAR reported third-quarter 2023 non-GAAP earnings per share of 23 cents compared with 21 cents recorded in the year-ago quarter. The reported figure surpassed the Zacks Consensus Estimate of a loss of 6 cents per share.
NETGEAR generated net revenues of $197.8 million, down 20.7% year over year. The downtick resulted from inventory reduction by SMB business partners amid a volatile macroeconomic environment. Also, geopolitical tensions and stagnant or negative GDP growth in major markets such as Greater China, Germany and Japan were headwinds. However, the top line beat the consensus estimate by 7.6%.
Region-wise, net revenues from the Americas were $141.1 million (71% of total revenues), down 16.7% year over year. Europe, the Middle East and Africa generated revenues (18%) of $35.6 million, down 20.4%. Revenues from the Asia Pacific region (11%) decreased 40.3% to $21.1 million.
NETGEAR ended the quarter with 844,000 paid service subscribers, up 26.7% year over year.
Segmental Performance
Connected Home (including Orbi, Nighthawk, Nighthawk Pro Gaming, Armor, and Meural Brands) delivered revenues of $127.3 million, down 15.4% year over year. The downtick was due to softness in the retail and service business, which had witnessed pandemic-led elevated consumer demand in the prior-year period. Our estimate for the segment’s revenues was pegged at $100.6 million. Continued momentum in premium CHP products, like Orbi 8, Orbi 9 Wi-Fi mesh and 5G mobile hotspots, acted as a tailwind.
NETGEAR holds about 35% share in the U.S. retail Wi-Fi market, including mesh, routers, gateways and extenders.
Despite a strong demand for ProAV-managed switched products, revenues from SMB declined 28.8% year over year to $70.5 million. The downtick was caused by continued channel inventory reductions by partners, owing to a volatile macroeconomic environment. Our estimate for segmental revenues was $83.4 million.
Other Details
Adjusted gross margin increased to 35% from 27.6% year over year. Non-GAAP operating income was $5.25 million compared with $1.77 million in the year-ago quarter.
Cash Flow & Liquidity
For the third quarter, NETGEAR generated $0.6 million in cash from operations. It also had $228.1 million in cash and cash equivalents and $259.8 million of total current liabilities compared with $202.8 million and $264.4 million, respectively, in the quarter that ended on Jul 2, 2023.
NTGR did not repurchase any shares in the quarter under review.
Q4 Outlook
For the fourth quarter of 2023, NETGEAR anticipates net revenues in the range of $175-$190 million. Management remains optimistic owing to healthy underlying demand trends in the premium portion of CHP business amid volatile macroeconomic conditions.
GAAP operating margin is estimated to be between (4.4)% and (1.4)%. Non-GAAP operating margin is expected in the (2)-1% band.
How Have Estimates Been Moving Since Then?
Analysts were quiet during the last two month period as none of them issued any earnings estimate revisions.
VGM Scores
Currently, NETGEAR, Inc. has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. 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
NETGEAR, Inc. has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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NETGEAR, Inc. (NTGR) Up 3.1% Since Last Earnings Report: Can It Continue?
It has been about a month since the last earnings report for NETGEAR, Inc. (NTGR - Free Report) . Shares have added about 3.1% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is NETGEAR, Inc. due for a pullback? 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.
NETGEAR Q3 Earnings Beat Estimates, Revenues Fall Y/Y
NETGEAR reported third-quarter 2023 non-GAAP earnings per share of 23 cents compared with 21 cents recorded in the year-ago quarter. The reported figure surpassed the Zacks Consensus Estimate of a loss of 6 cents per share.
NETGEAR generated net revenues of $197.8 million, down 20.7% year over year. The downtick resulted from inventory reduction by SMB business partners amid a volatile macroeconomic environment. Also, geopolitical tensions and stagnant or negative GDP growth in major markets such as Greater China, Germany and Japan were headwinds. However, the top line beat the consensus estimate by 7.6%.
Region-wise, net revenues from the Americas were $141.1 million (71% of total revenues), down 16.7% year over year. Europe, the Middle East and Africa generated revenues (18%) of $35.6 million, down 20.4%. Revenues from the Asia Pacific region (11%) decreased 40.3% to $21.1 million.
NETGEAR ended the quarter with 844,000 paid service subscribers, up 26.7% year over year.
Segmental Performance
Connected Home (including Orbi, Nighthawk, Nighthawk Pro Gaming, Armor, and Meural Brands) delivered revenues of $127.3 million, down 15.4% year over year. The downtick was due to softness in the retail and service business, which had witnessed pandemic-led elevated consumer demand in the prior-year period. Our estimate for the segment’s revenues was pegged at $100.6 million. Continued momentum in premium CHP products, like Orbi 8, Orbi 9 Wi-Fi mesh and 5G mobile hotspots, acted as a tailwind.
NETGEAR holds about 35% share in the U.S. retail Wi-Fi market, including mesh, routers, gateways and extenders.
Despite a strong demand for ProAV-managed switched products, revenues from SMB declined 28.8% year over year to $70.5 million. The downtick was caused by continued channel inventory reductions by partners, owing to a volatile macroeconomic environment. Our estimate for segmental revenues was $83.4 million.
Other Details
Adjusted gross margin increased to 35% from 27.6% year over year. Non-GAAP operating income was $5.25 million compared with $1.77 million in the year-ago quarter.
Cash Flow & Liquidity
For the third quarter, NETGEAR generated $0.6 million in cash from operations. It also had $228.1 million in cash and cash equivalents and $259.8 million of total current liabilities compared with $202.8 million and $264.4 million, respectively, in the quarter that ended on Jul 2, 2023.
NTGR did not repurchase any shares in the quarter under review.
Q4 Outlook
For the fourth quarter of 2023, NETGEAR anticipates net revenues in the range of $175-$190 million. Management remains optimistic owing to healthy underlying demand trends in the premium portion of CHP business amid volatile macroeconomic conditions.
GAAP operating margin is estimated to be between (4.4)% and (1.4)%. Non-GAAP operating margin is expected in the (2)-1% band.
How Have Estimates Been Moving Since Then?
Analysts were quiet during the last two month period as none of them issued any earnings estimate revisions.
VGM Scores
Currently, NETGEAR, Inc. has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. 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
NETGEAR, Inc. has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.