Why Is Ubiquiti (UI) Up 51.5% Since Last Earnings Report?

It has been about a month since the last earnings report for Ubiquiti Inc. (UI). Shares have added about 51.5% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Ubiquiti due for a pullback? 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.

Ubiquiti Q1 Earnings Top Estimates on Record Revenues

Ubiquiti reported solid first-quarter fiscal 2020 results, wherein both the bottom line and top line surpassed the respective Zacks Consensus Estimate and increased year over year. Notably, the company registered record revenues and GAAP earnings per share.

Net Income

On a GAAP basis, net income for the September quarter was $98.1 million or $1.43 per share compared with $85.7 million or $1.16 per share in the prior-year quarter. The improvement was primarily attributable to higher operating income and a reduction in share count.

Non-GAAP net income came in at $98.7 million or $1.44 per share compared with $86.2 million or $1.17 per share in the year-ago quarter. The bottom line beat the Zacks Consensus Estimate by 16 cents.

Revenues

Quarterly revenues increased 14.3% year over year to $323.3 million backed by higher sales of service provider technology and enterprise technology products. By product type, revenues from Service Provider Technology were $115.9 million compared with $105 million reported in the year-ago quarter. Enterprise Technology revenues were $207.4 million, up from $177.9 million. The top line surpassed the consensus estimate of $299 million.

Region wise, revenues from North America were $148 million compared with $119.4 million a year ago. Revenues from South America were $19.8 million compared with $14.2 million, and the same from Asia Pacific totaled $29.7 million, up from $24.4 million. The increase was primarily due to higher revenues from both product segments. Revenues from Europe, Middle East and Africa were $125.8 million, slightly up from $124.9 million.

Other Details

Overall gross profit increased to $151.4 million from $131.6 million in the year-ago quarter driven by top-line growth. Gross margin improved to 46.8% from 46.5%, led by favorable mix of products sold, partly offset by higher tariffs and indirect costs. Total operating expenses were $30.7 million compared with $32 million in the year-earlier quarter on account of lower SG&A expenses. Operating income improved to $120.7 million from $99.6 million mainly due to higher gross profit.

Cash Flow & Liquidity

During the fiscal first quarter, Ubiquiti generated $119.7 million of net cash from operating activities compared with $93.9 million in the prior-year quarter. As of Sep 30, 2019, the computer networking company had $119.7 million in cash and equivalents with $621.5 million of long-term debt.

During the reported quarter, Ubiquiti repurchased 3,635,534 shares at an average price of $114.49 per share. It bought back an additional 995,495 shares at an average price of $120.11 subsequent to Sep 30, 2019. Further, the company initiated a new stock repurchase program to buy back up to $200 million worth of shares.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates revision.

VGM Scores

Currently, Ubiquiti has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. Charting a somewhat similar path, the stock was allocated a grade of F on the value side, putting it in the bottom 20% quintile 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.

Outlook

Estimates have been trending upward for the stock, and the magnitude of this revision

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