The Ubiquiti Networks (UBNT) Earnings Report: What to Expect (CRNT, AVNW & DRWI)

The third quarter 2014 earnings report for network communication platform maker Ubiquiti Networks Inc (NASDAQ: UBNT), a peer of small cap stocks Aviat Networks Inc (NASDAQ: AVNW), Ceragon Networks Ltd (NASDAQ: CRNT) and DragonWave, Inc (NASDAQ: DRWI), is due out after the market closes on Thursday with shares already trending upwards as they closed 4.08% higher on Tuesday. Aside from the Ubiquiti Networks earnings report, it should be said that Aviat Networks Inc reported earnings yesterday after the market closed (shares were sinking hard in after hours trading); Ceragon Networks Ltd will report earnings before the market opens on Thursday; and DragonWave, Inc is scheduled to report after the market closes next Wednesday. So it's a busy week for network communications stocks.

What Should You Watch Out for With the Ubiquiti Networks Inc Earnings Report?

First, here is a quick recap of Ubiquiti Networks' recent earnings history according to Yahoo! Finance:

Earnings HistoryMar 13Jun 13Sep 13Dec 13

EPS Est	0.22	0.27	0.40	0.45
EPS Actual	0.24	0.33	0.46	0.48
Difference	0.02	0.06	0.06	0.03
Surprise %	9.10%	22.20%	15.00%	6.70%

 

In early February, Ubiquiti Networks reported second fiscal quarter of 2014 results that were above analyst expectations with the company giving a higher guidance of:

Revenues of between $138 million and $144 million GAAP Diluted EPS of between $0.46 and $0.50 Non-GAAP Diluted EPS of between $0.47 and $0.51

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This time around and according to Yahoo! Finance analyst estimates page, the consensus expects Ubiquiti Networks to report revenues of $141.92M and EPS of $0.49 - higher than the $0.46 expected ninety days ago.

As for other news, Bernstein Research's Pierre Ferragu initiated coverage on Ubiquiti Networks back in March with the following comment:

Ubiquiti represents a breakthrough in Data networking. The company targets the last pockets of growth in the market with a highly efficient and defensible business model. It captured 60% of Wireless Fixed Broadband Access, the only area of growth left in Fixed Access. It also captured almost 10% volume share in WiFi in ~20 months, with aproduct targeting what is left of Greenfield opportunities in that segment [...] Ubiquiti has developed a unique business model, highly defensible and driving strong economic returns. With a blank sheet of paper approach, the company develops simple, cost-optimised and "no-frills" products, targeting the lagging end of the Data Networking market (late adopters with a focus on emerging markets) and runs a lean operation with virtually no distribution costs. We expect Ubiquiti to to expand its model to additional segments. On that basis we anticipate growth well above consensus in the coming next 3 years: 48% p.a. in revenues, 61% in EPS.

However, investors might want to read a blog post from Monday's Wall Street Journal (Ubiquiti Shows Compliance Perils of Rapid Growth) about how Ubiquiti Networks recently paid a $504,225 penalty for allowing its equipment to be sold to Iran which the author blamed on the company's skeletal business model.

What do the Ubiquiti Networks Inc Charts Say?

The latest technical chart for Ubiquiti Networks shows considerable bullishness up until mid to late March:

But the long term performance chart shows a clear downtrend for peers like Ceragon Networks, Aviat Networks and DragonWave that has lasted for a couple of years:

And for reference, here are the latest technical charts for Ceragon Networks, Aviat Networks and DragonWave:  

What Should Be Your Next Move?

According to HighShortInterest.com, Ubiquiti Networks has elevated short interest of 21.09% which means there is the possibility of an outsized move in either direction – something everyone needs to keep in mind before placing a bet ahead of earnings.