NETGEAR (NTGR) Q2 Earnings Beat Estimates, Revenues Up Y/Y

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NETGEAR, Inc. NTGR second-quarter 2018 adjusted earnings per share came in at 57 cents, surpassing the Zacks Consensus Estimate of 52 cents. However, the figure was lower than 60 cents per share reported a year ago.

On a GAAP basis, net loss for the reported quarter came in at $5.2 million or 17 cents per share against net income of $14.6 million or 44 cents per share in the year-ago quarter. The year-over-year decline can primarily be attributed to rise in the company's operating expenses.

Non-GAAP net income came in at $18.6 million compared with $19.9 million in the year-ago quarter.

Inside the Headlines

Quarterly net revenues grew 10.9% year over year to $366.8 million. The top line also outpaced the Zacks Consensus Estimate of $351 million. Strong growth across all the company's three segments drove the overall top line.

NETGEAR, Inc. Price, Consensus and EPS Surprise

NETGEAR, Inc. Price, Consensus and EPS Surprise | NETGEAR, Inc. Quote

Operating Metrics

Non-GAAP gross margin was 30.2% compared with 28.4% in the year-ago quarter.

Total non-GAAP operating expenses were $88.9 million, up 35.1% year over year. Non-GAAP operating margin was 5.9% compared with 8.5% in the prior-year quarter.

Segmental Performance

Net revenues from Arlo increased 33.2% year over year to $104.8 million. The rise was driven by the rapid expansion of smart camera market combined with the success of Arlo Pro 2 camera.

Connected Home segment, which includes the industry leading Nighthawk and Orbi brands, generated net revenues of $191.2 million, up 2.9% year over year. The improvement was primarily driven by Orbi, the Nighthawk Pro Gaming Router and the company's cable modems and gateway.

The SMB segment net revenues increased 7.1% year over year to $70.8 million, primarily due to increased sales from switches. The company is witnessing strength in switching lines especially in the areas of 10-gig multi-gig and POE switches categories.

Cash Flow and Liquidity

During the quarter, NETGEAR used cash flow from operating activities of $16.9 million.

As of Jul 1, 2018, the company had $227.4 million of cash and cash equivalents and $266 million as other accrued current liabilities.


For third-quarter 2018, NETGEAR's management expect net revenues to be between $380 million and $395 million.

Non-GAAP operating margin is projected to be in the range of 4.0-5.0%. GAAP tax rate is expected to be approximately 108% while non-GAAP tax rate is expected to be 23.5%.

Zacks Rank & Stocks to Consider

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

Some better-ranked stocks in the same space are Adobe Systems Incorporated ADBE , Cisco Systems, Inc. CSCO and AMETEK, Inc. AME . While Adobe Systems sports a Zacks Rank #1 (Strong Buy), Cisco Systems and AMETEK carry a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank stocks here .

Adobe Systems surpassed estimates in each of the trailing four quarters with an average beat of 8.94%.

Cisco Systems exceeded estimates thrice in the trailing four quarters with an average beat of 2.50%.

AMETEK surpassed estimates in each of the trailing four quarters with an average beat of 6.03%.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Business , Earnings , Stocks
Referenced Symbols: CSCO , NTGR , ADBE , AME

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