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COMM Completes Strategic Divestiture for Core Focus: Stock to Gain?

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CommScope Holding Company, Inc. (COMM - Free Report) recently announced that it has completed the divestiture of Outdoor Wireless Networks (OWN) and Distributed Antenna Systems (DAS) businesses. It’s DAS businesses provides solutions for cellular infrastructure inside campuses, venues and enterprises, while OWN business focuses on delivering wireless infrastructure for mobile networks.

In July 2024, CommScope signed an agreement with Amphenol Corporation to sell its OWN and DAS business for approximately $2.1 billion. Amphenol, a leading designer and manufacturer of electronic and fiber optic connectors, interconnect systems, antennas, sensors will gain a strong portfolio of advanced technologies for communication networks. The acquired businesses are expected to generate around $1.3 billion in net sales in fiscal 2025.

Will This Divestiture Drive COMM's Share Performance?

The proceeds of the sale will be utilized to fully repay all outstanding amounts under CommScope’s asset-backed revolving credit facility. It will also allow CommScope to fully repay senior secured notes due 2026 and partially repay the senior secured notes due 2029.

The divestiture will allow CommScope to increase its focus and further strengthen CommScope NEXT priorities with remaining segments and business units. In January 2024, CommScope also completed its divestiture of its Home Networks business to Vantiva. These strategic divestitures will enable CommScope to prioritize its core businesses and enhance operational efficiency to ensure long-term sustainable growth.

High Debt Burden Remains a Concern for COMM

As of Sept. 30, 2024, the company had $392.1 million in cash and cash equivalents and $8 billion in long-term debt. As of the third quarter of fiscal 2024, its debt-to-capital ratio stands at 155.8%, while its cash ratio and quick ratio stand at 0.16 and 1.05, respectively.

In December 2024, CommScope completed a comprehensive refinancing transaction with its first lien-secured lenders to address its short-term debt obligations. Management’s effort to improve overall financial stability and realign its capital structure is commendable. However, the company’s high debt-to-capital ratio remains an overhang. This makes it susceptible to macroeconomic headwinds and negatively impacts investors’ confidence.

COMM’s Stock Price Movement

Shares of CommScope have gained 139.2% over the past year compared with the industry’s growth of 45.2%.

Zacks Investment Research
Image Source: Zacks Investment Research

COMM’s Zacks Rank and Key Picks

CommScope currently carries a Zacks Rank #5 (Strong Sell).

Some better-ranked stocks in the broader industry have been discussed below.

Keysight Technologies, Inc. (KEYS - Free Report) has a Zacks Rank of 2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

In the last reported quarter, it delivered an earnings surprise of 5.10%. Keysight is expected to benefit from the growing proliferation of electronic content in vehicles, momentum in space and satellite applications, and rising adoption of driver-assistance systems globally.

InterDigital (IDCC - Free Report) carries a Zacks Rank #2 at present. In the last reported quarter, it delivered an earnings surprise of 114.47%.

It is a pioneer in advanced mobile technologies that enable wireless communications and capabilities. The company designs and develops a wide range of advanced technology solutions used in digital cellular, wireless 3G, 4G and IEEE 802-related products and networks.

Zillow Group, Inc. (ZG - Free Report) carries a Zacks Rank #2 at present. In the last reported quarter, it delivered an earnings surprise of 9.38%. ZG delivered an earnings surprise of 25.47%, on average, in the trailing four quarters. The company is witnessing solid momentum in rental revenues, driven by growth in multi and single-family listings, which is a positive factor.

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