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Why Is Ubiquiti Networks, Inc. (UBNT) Down -11.68% Since its Last Earnings Report?

A month has gone by since the last earnings report for Ubiquiti Networks, Inc.UBNT . Shares have lost about 11.7% in that time frame.

Will the recent negative trend continue leading up to its next earnings release, or is UBNT 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 drivers.

Ubiquiti's Q2 Earnings Miss Estimates, Revenues Up Y/Y

Ubiquiti's second-quarter fiscal 2018 earnings fell short of estimates, putting an end to the three-quarter earnings beat streak. The company's adjusted earnings came in at 76 cents, which missed the Zacks Consensus Estimate of 81 cents by 6.2%. Shares fell about 14.1% in the trading session following the results, indicating that investors were disappointed with the earnings miss.

However, the figure was up 5.6% compared with year-ago quarterly figure of 72 cents. The year-over-year improvement can primarily be attributable to impressive top-line growth during the quarter.

Inside the Headlines

Ubiquiti reported record revenues of $250.8 million, which crossed the higher end of the company's projected range of $240-$250 million. Further, it grew 17.2% on a year-over-year basis, and topped the Zacks Consensus Estimate of $220 million comfortably. Steady demand in all product lines across end markets proved conducive to top-line growth.

The company's Enterprise Technology segment continued to fare remarkably well, with revenues surging a whopping 33.7% year over year to $131 million. Continued adoption of the company's UniFi AC technology platform fueled striking growth.

The Service Provider Technology segment also achieved growth of 3.7% year over year, generating $119.9 million.

In terms of geography, revenues in Asia Pacific remained steady, rising 48.6% year over year. EMEA regions (Europe, the Middle East and Africa) and South America increased 31.8% and 7.6% respectively, from the comparable period last year. North America also witnessed a growth on a year-over-year basis, with revenues growing 0.4% during the fiscal second quarter.

GAAP gross margin for the quarter was down year over year to 38.6%.

Significant Developments

During the reported quarter, Ubiquiti initiated a new stock repurchase program. The stock repurchase program authorizes the company to repurchase up to $150 million of its common stock. Moreover, the company entered into a new credit facility, providing for a $400 million revolving credit facility as well as a $500 million term loan.

Further, during the reported quarter, the company announced UNMS (Ubiquiti Network Management System), proprietary software, offering for the centralized control of Ubiquiti devices across multiple sites globally.

Liquidity & Share Repurchases

Ubiquiti ended the fiscal second quarter with cash and cash equivalents of $823.8 million, compared with $604.2 million as of Jun 30, 2017. Long-term debt was about $453 million, compared with $241.8 million as of Jun 30, 2017.

Outlook

Concurrent with the earnings release, the company provided guidance for third-quarter fiscal 2018. Management projects revenues for the fiscal third quarter in the range of $245-260 million, while non-GAAP earnings are expected within 92-99 cents per share.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates. There has been one revision higher for the current quarter In the past month, consensus estimates have shifted by 12.3% due to these changes.

Ubiquiti Networks, Inc. Price and Consensus

Ubiquiti Networks, Inc. Price and Consensus | Ubiquiti Networks, Inc. Quote

VGM Scores

At this time, UBNT has an average Growth Score of C, though it is lagging a lot on the momentum front with an F. The stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

The company's stock is suitable solely for growth, based on our styles scores.

Outlook

Estimates have been trending upward for the stock and the magnitude of this revision looks promising. Notably, UBNT has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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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.


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

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