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NETGEAR (NTGR) Down 1.2% Since Last Earnings Report: Can It Rebound?
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It has been about a month since the last earnings report for NETGEAR, Inc. (NTGR - Free Report) . Shares have lost about 1.2% 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 its most recent earnings report in order to get a better handle on the important catalysts.
NETGEAR Q2 Loss Narrower Than Expected
NETGEAR reported a second-quarter 2024 non-GAAP loss of 74 cents per share compared with the non-GAAP loss of 16 cents in the year-ago quarter. The reported figure was narrower than the Zacks Consensus Estimate of a loss of 82 cents per share.
NETGEAR generated net revenues of $143.9 million, down 17% year over year. The downtick resulted from weakness across the CHP and NFB businesses. Also, it experienced significant impacts from channel inventory destocking and costs associated with reducing legacy inventory during this period. However, the top line beat the consensus estimate by 8.45%.
Region-wise, net revenues from the Americas were $95.5 million (66% of total revenues), down 18% year over year. Europe, the Middle East and Africa generated revenues (19%) of $27.3 million, down 24.3%. Revenues from the Asia Pacific region (15%) increased 1.9% year over year to $21 million.
NETGEAR ended the quarter with 958,000 paid service subscribers, including 544,000 recurring subscribers, contributing to a 30% year-over-year increase in recurring subscriber revenues.
Segmental Details
Connected Home or CHP segment (which includes Orbi, Nighthawk and Armor brands) generated revenues of $84 million, down 14.6% year over year. Despite challenging conditions, the segment continues to drive growth in premium products and saw positive demand trends for new lower-priced Wi-Fi 7 products and cable modems. It aims to release a range of innovative products over the next 12 months to further expand its market footprint and subscription growth. Our estimate was pegged at $72.4 million.
Despite achieving record sales of ProAV managed switch products, revenues from NETGEAR for Business (NFB) revenues declined 20.2% year over year to $59.8 million. Traditional IT and WI-FI Lan markets underperformed.
Other Details
Adjusted gross margin decreased to 22.4% from 31.6% year over year. Non-GAAP operating loss was $31.1 million compared with operating loss of $10.7 million in the year-ago quarter.
Non-GAAP operating expenses were $63.3 million, down 3.3%.
Cash Flow & Liquidity
For the quarter ended Jun 30, 2024, NETGEAR generated $35.6 million in cash from operations. It also had $177.1 million in cash and cash equivalents and $253 million of total current liabilities compared with $106.4 million and $264.4 million, respectively, in the quarter that ended on Jul 2, 2023.
The company repurchased 799,800 shares worth $21.4 million in the quarter under review. The board of directors authorized the repurchase of up to an additional 3,000,000 shares, bringing the total buyback program to 3,875,000 shares, valued at roughly $62 million based on recent share prices.
Guidance
Management projects net revenues in the band of $160-$175 million. The company expects to see more predictable performance following the completion of destocking for both NFB and CHP businesses. It anticipates revenues from the service provider channel to be nearly $15 million in the third quarter, with new 5G mobile hotspots expected to be launched in the fourth quarter.
Gross margins and operating margins are likely to remain affected by ongoing inventory reduction efforts and elevated transportation costs, including those related to the Red Sea shipping crisis.
GAAP operating margin is forecasted to be between (15.3)% and (12.3)%. Non-GAAP operating margin is estimated in the band of (11)-(8)%.
GAAP tax expense is expected to be between $1 million and $2 million, with a non-GAAP tax benefit projected to be between $1.5 million and $2.5 million for the third quarter of 2024.
NETGEAR expects to consume cash in the third quarter and but expects to generate more than enough cash in the fourth quarter to offset that decline.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended downward during the past month.
The consensus estimate has shifted -59.72% due to these changes.
VGM Scores
Currently, NETGEAR has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% 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 downward for the stock, and the magnitude of these revisions 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 1.2% Since Last Earnings Report: Can It Rebound?
It has been about a month since the last earnings report for NETGEAR, Inc. (NTGR - Free Report) . Shares have lost about 1.2% 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 its most recent earnings report in order to get a better handle on the important catalysts.
NETGEAR Q2 Loss Narrower Than Expected
NETGEAR reported a second-quarter 2024 non-GAAP loss of 74 cents per share compared with the non-GAAP loss of 16 cents in the year-ago quarter. The reported figure was narrower than the Zacks Consensus Estimate of a loss of 82 cents per share.
NETGEAR generated net revenues of $143.9 million, down 17% year over year. The downtick resulted from weakness across the CHP and NFB businesses. Also, it experienced significant impacts from channel inventory destocking and costs associated with reducing legacy inventory during this period. However, the top line beat the consensus estimate by 8.45%.
Region-wise, net revenues from the Americas were $95.5 million (66% of total revenues), down 18% year over year. Europe, the Middle East and Africa generated revenues (19%) of $27.3 million, down 24.3%. Revenues from the Asia Pacific region (15%) increased 1.9% year over year to $21 million.
NETGEAR ended the quarter with 958,000 paid service subscribers, including 544,000 recurring subscribers, contributing to a 30% year-over-year increase in recurring subscriber revenues.
Segmental Details
Connected Home or CHP segment (which includes Orbi, Nighthawk and Armor brands) generated revenues of $84 million, down 14.6% year over year. Despite challenging conditions, the segment continues to drive growth in premium products and saw positive demand trends for new lower-priced Wi-Fi 7 products and cable modems. It aims to release a range of innovative products over the next 12 months to further expand its market footprint and subscription growth. Our estimate was pegged at $72.4 million.
Despite achieving record sales of ProAV managed switch products, revenues from NETGEAR for Business (NFB) revenues declined 20.2% year over year to $59.8 million. Traditional IT and WI-FI Lan markets underperformed.
Other Details
Adjusted gross margin decreased to 22.4% from 31.6% year over year. Non-GAAP operating loss was $31.1 million compared with operating loss of $10.7 million in the year-ago quarter.
Non-GAAP operating expenses were $63.3 million, down 3.3%.
Cash Flow & Liquidity
For the quarter ended Jun 30, 2024, NETGEAR generated $35.6 million in cash from operations. It also had $177.1 million in cash and cash equivalents and $253 million of total current liabilities compared with $106.4 million and $264.4 million, respectively, in the quarter that ended on Jul 2, 2023.
The company repurchased 799,800 shares worth $21.4 million in the quarter under review. The board of directors authorized the repurchase of up to an additional 3,000,000 shares, bringing the total buyback program to 3,875,000 shares, valued at roughly $62 million based on recent share prices.
Guidance
Management projects net revenues in the band of $160-$175 million. The company expects to see more predictable performance following the completion of destocking for both NFB and CHP businesses. It anticipates revenues from the service provider channel to be nearly $15 million in the third quarter, with new 5G mobile hotspots expected to be launched in the fourth quarter.
Gross margins and operating margins are likely to remain affected by ongoing inventory reduction efforts and elevated transportation costs, including those related to the Red Sea shipping crisis.
GAAP operating margin is forecasted to be between (15.3)% and (12.3)%. Non-GAAP operating margin is estimated in the band of (11)-(8)%.
GAAP tax expense is expected to be between $1 million and $2 million, with a non-GAAP tax benefit projected to be between $1.5 million and $2.5 million for the third quarter of 2024.
NETGEAR expects to consume cash in the third quarter and but expects to generate more than enough cash in the fourth quarter to offset that decline.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended downward during the past month.
The consensus estimate has shifted -59.72% due to these changes.
VGM Scores
Currently, NETGEAR has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% 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 downward for the stock, and the magnitude of these revisions 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.