Why Casa Systems Is Wednesday's Big Earnings Loser

Chris Lange

When Casa Systems Inc. (NASDAQ: CASA) released its second-quarter financial results after the markets closed on Tuesday, the company posted $0.24 in earnings per share (EPS) and $68.7 million in revenue. The consensus estimates had called for $0.23 in EPS and $90.3 million in revenue. In the same period of last year, Casa Systems said it had EPS of $0.23 on $66.63 million in revenue.

In the report, the board of directors authorized the repurchase of up to $75 million of the common stock under a stock repurchase program. Keep in mind the company currently has a market cap just shy of $1 billion.

Also during the latest quarter, the company reported a gross margin of 71.9%, compared to a gross margin of 68.7% in the same period last year.

Looking ahead to the 2018 fiscal full year, the company expects to see EPS in the range of $0.80 to $0.88 and revenues between $330 million and $350 million. The consensus estimates are $1.14 in EPS and $390.57 million in revenue.

Jerry Guo, Casa’s president and CEO, commented:

During the quarter, we expanded into new geographies with new and existing customers.  As part of our land and expand business model, we believe these deployments will lead to high-margin capacity expansions in the future.  While we are disappointed with the moderation in our top-line growth during the second quarter, we believe that this is related to the timing of several projects involving network transformation and capacity upgrades.  Given the forward pipeline in all three of our end markets, I am as enthusiastic as ever about the outlook for the company.  Based on our confidence in the future of the business and commitment to delivering value to our shareholders, we are announcing a stock repurchase program for up to $75 million of shares of common stock.

Shares of Casa Systems were last seen down about 24% at $11.79, with a consensus analyst price target of $24.60 and a 52-week range of $0.09 to $34.21.