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Netgear (NTGR) Down 13.1% Since Last Earnings Report: Can It Rebound?
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It has been about a month since the last earnings report for Netgear (NTGR - Free Report) . Shares have lost about 13.1% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Netgear 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 catalysts.
NETGEAR Trumps Q1 Earnings and Revenue Estimates
NETGEAR reported strong first-quarter 2019 results, surpassing both the top line and bottom-line estimates. The better-than-expected performance was driven by strength in its Orbi line of mesh WiFi systems, Nighthawk Pro Gaming, cable modems and gateways and SMB switching portfolio.
Net Loss
On a GAAP basis, net income for the quarter was $12.8 million or 39 cents per share compared with $5.6 million or 17 cents per share a year ago. The improvement was primarily driven by top-line growth and lower operating expenses.
Non-GAAP net income from continuing operations improved to 60 cents per share from 26 cents in the year-ago quarter, comfortably beating the Zacks Consensus Estimate of 49 cents.
Revenues
NETGEAR generated quarterly net revenues of $249.1 million, up 1.6% year over year as growth in SMB more than offset the decline in the Connected Home segment. The top line surpassed the consensus estimate of $247 million and came in at the higher end of its previously guided range of $235-$250 million.
On a geographic basis, quarterly net revenues reflect the company’s continued strength in EMEA (Europe, Middle East and Africa) and APAC (Asia Pacific Region). Revenues for the Americas were $148 million (59% of net revenues), down 7.5% year over year due to reduced service provider sales and decline in the U.S. retail WiFi market. EMEA revenues were $57 million (23%), up 20.3% due to significant improvement in service provider revenues. APAC revenues were $44.1 million (18%), up 16.8% driven by higher service provider channel sales.
Segmental Performance
The Connected Home segment, which includes Nighthawk, Orbi, Nighthawk Pro Gaming and Meural brands, generated net revenues of $169.4 million, down 2.8% year over year owing to lower service provider revenues and post-holiday seasonality issues. Notably, NETGEAR continues to hold about 50% market share in U.S. retail WiFi products, which include mesh, routers, gateways and extenders.
Net revenues from the SMB segment increased 12.5% year over year to $79.7 million driven by strength in switching portfolio, particularly PoE and ProAV switches, and extra shipments in the United Kingdom in expectation of the Brexit deadline.
Other Quarter Details
GAAP gross margin improved to 32.9% from 31.1% in the year-ago quarter. GAAP operating margin was 5.6% compared with 0.6% in the prior-year quarter as stringent cost-cutting initiatives led to lower operating expenses.
Cash Flow and Liquidity
During the first quarter, NETGEAR utilized $37.2 million of cash from continuing operations for working capital needs to shift the manufacturing operations out of China to mitigate imposed tariffs. As of Mar 31, 2019, the company had $185.7 million of cash and cash equivalents. The company repurchased approximately 436,000 shares at an average price of $34.41 per share for $15 million. Since the initiation of the repurchase program in fourth-quarter 2013, the company has repurchased approximately 12.8 million shares.
Second-Quarter Guidance
For the second quarter of 2019, NETGEAR expects revenues between $215 million and $230 million, due to reduced shipments. The company anticipates GAAP operating margin to be in the range of 0-1% owing to higher marketing expenses to support WiFi 6 initiatives. Non-GAAP operating margin is projected to be 4-5%.
NETGEAR is confident that it will remain a leader in new product introduction, based on the Wi-Fi 6 standards. The company aims to push its product line forward with two technology inflections — the shift from DOCSIS 3.0 to 3.1 and move from 11ac to WiFi 6. Moving forward, NETGEAR intends to capitalize on technology inflections, create new categories and build recurring service revenues to maintain its market leadership and drive future growth.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -53.46% due to these changes.
VGM Scores
At this time, Netgear has a great Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. 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 this revision indicates a downward shift. It's no surprise Netgear has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.
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Netgear (NTGR) Down 13.1% Since Last Earnings Report: Can It Rebound?
It has been about a month since the last earnings report for Netgear (NTGR - Free Report) . Shares have lost about 13.1% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Netgear 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 catalysts.
NETGEAR Trumps Q1 Earnings and Revenue Estimates
NETGEAR reported strong first-quarter 2019 results, surpassing both the top line and bottom-line estimates. The better-than-expected performance was driven by strength in its Orbi line of mesh WiFi systems, Nighthawk Pro Gaming, cable modems and gateways and SMB switching portfolio.
Net Loss
On a GAAP basis, net income for the quarter was $12.8 million or 39 cents per share compared with $5.6 million or 17 cents per share a year ago. The improvement was primarily driven by top-line growth and lower operating expenses.
Non-GAAP net income from continuing operations improved to 60 cents per share from 26 cents in the year-ago quarter, comfortably beating the Zacks Consensus Estimate of 49 cents.
Revenues
NETGEAR generated quarterly net revenues of $249.1 million, up 1.6% year over year as growth in SMB more than offset the decline in the Connected Home segment. The top line surpassed the consensus estimate of $247 million and came in at the higher end of its previously guided range of $235-$250 million.
On a geographic basis, quarterly net revenues reflect the company’s continued strength in EMEA (Europe, Middle East and Africa) and APAC (Asia Pacific Region). Revenues for the Americas were $148 million (59% of net revenues), down 7.5% year over year due to reduced service provider sales and decline in the U.S. retail WiFi market. EMEA revenues were $57 million (23%), up 20.3% due to significant improvement in service provider revenues. APAC revenues were $44.1 million (18%), up 16.8% driven by higher service provider channel sales.
Segmental Performance
The Connected Home segment, which includes Nighthawk, Orbi, Nighthawk Pro Gaming and Meural brands, generated net revenues of $169.4 million, down 2.8% year over year owing to lower service provider revenues and post-holiday seasonality issues. Notably, NETGEAR continues to hold about 50% market share in U.S. retail WiFi products, which include mesh, routers, gateways and extenders.
Net revenues from the SMB segment increased 12.5% year over year to $79.7 million driven by strength in switching portfolio, particularly PoE and ProAV switches, and extra shipments in the United Kingdom in expectation of the Brexit deadline.
Other Quarter Details
GAAP gross margin improved to 32.9% from 31.1% in the year-ago quarter. GAAP operating margin was 5.6% compared with 0.6% in the prior-year quarter as stringent cost-cutting initiatives led to lower operating expenses.
Cash Flow and Liquidity
During the first quarter, NETGEAR utilized $37.2 million of cash from continuing operations for working capital needs to shift the manufacturing operations out of China to mitigate imposed tariffs. As of Mar 31, 2019, the company had $185.7 million of cash and cash equivalents. The company repurchased approximately 436,000 shares at an average price of $34.41 per share for $15 million. Since the initiation of the repurchase program in fourth-quarter 2013, the company has repurchased approximately 12.8 million shares.
Second-Quarter Guidance
For the second quarter of 2019, NETGEAR expects revenues between $215 million and $230 million, due to reduced shipments. The company anticipates GAAP operating margin to be in the range of 0-1% owing to higher marketing expenses to support WiFi 6 initiatives. Non-GAAP operating margin is projected to be 4-5%.
NETGEAR is confident that it will remain a leader in new product introduction, based on the Wi-Fi 6 standards. The company aims to push its product line forward with two technology inflections — the shift from DOCSIS 3.0 to 3.1 and move from 11ac to WiFi 6. Moving forward, NETGEAR intends to capitalize on technology inflections, create new categories and build recurring service revenues to maintain its market leadership and drive future growth.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -53.46% due to these changes.
VGM Scores
At this time, Netgear has a great Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. 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 this revision indicates a downward shift. It's no surprise Netgear has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.