On Friday, President and CEO of infrastructure provider Commscope Holding Company Inc (NASDAQ:COMM), Charles Treadway, disclosed in a US Securities and Exchange Commission that he purchased 59,927 shares at $8.34 a share for a total just shy of $500,000. Treadway also has 1.15 million in shares and some restricted shares. Treadway has been CEO since October 2020. Six insiders purchased 0.12% of the total float in the last three months. Senior management’s open market purchases frequently signal that the company seems “cheap” to them with a brighter outlook.
Q1 2022 hedge fund letters, conferences and more
The insider purchase and previous accumulation trends have resulted in a Fintel officer accumulation score of 91.16. This places COMM in 34th place out of 11,483 analyzed companies. In addition to this score, COMM has an insider accumulation score of 89.65.
The chart below from the platform shows the short-term profit analysis from open-market non-planned purchases made by COMM's insiders in 2022.
COMM shares have been pressured this year and have tumbled 61.4% over the last 12 months.
In 2022, the company's price has underperformed the broader market, falling 30.6% versus Nasdaq's 24.1% plunge. During April and May, shares found support with a market cap near $1.5 billion, likely supported by the release of first quarter results and positive commentary on the second quarter outlook.
Fintel research shows sentiment remaining bullish in the underlying options market for CommScope with a put/call ratio of 0.14. The ratio is calculated by analyzing all stock's disclosed put and call options. The chart below illustrates this ratio vs. the share price for the last three months.
Results and outlook:
First quarter results released in May beat analyst forecasts across several metrics. The company reported core earnings per share of 26 cents compared to a consensus forecast of 20 cents. These earnings, however, fell from the prior year's 36 cents per share. Net revenue grew to $2.23 billion from $2.07 in the previous year and beat analyst forecasts of $2.08 billion by 7.2%.
Management commented that the negative impacts of Covid on the company were receding with a recovery in demand for its products. However, the virus's adverse indirect effects, such as inflation, offset that.
More specifically, COMM "believes the global supply chain challenges and their adverse impact on its business and financial results will persist, at least through the remainder of 2022, and may extend into periods after that".
The company reaffirmed its 2022 core adjusted EBITDA target of $1.15-1.25 billion compared to analyst forecasts of $1.18 billion, slightly below the mid-point of the range.
For the second quarter, COMM expects moderately improved net sales and adjusted EBITDA compared to first quarter numbers, and it anticipates an accelerated second half recovery as pricing power improves.
Analyst commentary:
Deutsche Bank's Matthew Niknam said the company's reiterated guidance was probably the biggest first quarter surprise. Deutsche had expected a guidance downgrade on what he called the prospect of worsening supply chain headwinds. Niknam raised his price target to $10 from $9 and reiterated a 'buy' rating.
George Notter from Jefferies believes the results were better than feared, with price increases and manufacturing expansion beginning to impact his model. He believes these catalysts, strong demand trends, some relief on input costs, and strong management keep the shares buy-rated. Notter retained his $15 price target for COMM shares.
Analysts' consensus rating on the stock is hold and their average price target is $9.80, which implies a 22% upside to the price. The consensus has dropped significantly over the past year, from $23 a year ago.
Article by Ben Ward, Fintel
