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Cogent (CCOI) Q4 Earnings Beat Estimates, Revenues Rise Y/Y

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Cogent Communications Holdings, Inc. CCOI reported healthy fourth-quarter 2019 financial results, wherein both the top and bottom lines surpassed the Zacks Consensus Estimate. The stock inched up 1.4% in response to the results, closing at $76.01 on Feb 27.

Net Income

Net income in the December quarter was $7.5 million or 16 cents per share compared with $7.1 million or 16 cents per share in the prior-year quarter. The improvement was primarily attributable to top-line growth. Full-year 2019 net income came in at $37.5 million or 81 cents per share compared with $28.7 million or 63 cents per share in 2018.

Fourth-quarter adjusted earnings per share were 25 cents compared with 16 cents in the year-earlier quarter. The bottom line beat the consensus estimate by 4 cents.

Cogent Communications Holdings, Inc. Price, Consensus and EPS Surprise

Revenues

Quarterly service revenues were $140.3 million compared with $132 million in the year-ago quarter. On a constant currency basis, the 6.2% increase was backed by higher on-net and off-net revenues. The top line surpassed the consensus estimate of $138 million. Full-year 2019 revenues rose 5% to $546.2 million from $520.2 million on the back of higher on-net and off-net revenues. However, foreign exchange woes negatively impacted full-year service revenues by $5.3 million.

On-net revenues jumped 7.7% to $102.7 million from $95.4 million in the year-ago quarter. The increase was primarily driven by healthy growth in on-net customer connections.

Off-net revenues increased 2.5% to $37.5 million from $36.6 million in the year-ago quarter, driven by a rise in off-net customer connections.

Other Details

Total operating expenses were $112.5 million compared with $109.8 million in the prior-year quarter led by higher network operations and SG&A expenses. Operating income was $28 million, up from $22.3 million. Adjusted EBITDA totaled $53 million compared with $47.7 million a year ago for respective margins of 37.8% and 36.1%.

During fourth-quarter 2019, the company registered 86,539 customer connections compared with 80,106 in the year-ago quarter. The year-over-year increase of 8% was backed by an improvement in both on-net and off-net customer connection tallies.

Cogent hiked its dividend for the 30th consecutive quarter, which represented its robust cash flow position. The company increased its quarterly dividend by 2 cents per share to 66 cents for first-quarter 2020.

Cash Flow & Liquidity

In 2019, Cogent generated $148.8 million of net cash from operating activities compared with $133.9 million in 2018. As of Dec 31, 2019, the company had $399.4 million in cash and equivalents with total current liabilities of $89.7 million compared with the respective tallies of $276.1 million and $75.3 million a year ago.

Zacks Rank & Stocks to Consider

Cogent currently has a Zacks Rank #3 (Hold).

A few better-ranked stocks in the broader industry are Telenav, Inc. TNAV, Perion Network Ltd. (PERI - Free Report) and PCTEL, Inc. PCTI. While Telenav and Perion sport a Zacks Rank #1 (Strong Buy), PCTEL carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Telenav exceeded estimates twice in the trailing four quarters, the positive earnings surprise being 77.1%, on average.

Perion exceeded estimates in each of the trailing four quarters, the positive earnings surprise being 87.9%, on average.

PCTEL exceeded estimates in each of the trailing four quarters, the positive earnings surprise being 150.6%, on average.

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