Ceragon Networks Ltd. CRNT recently reported fourth-quarter 2024 adjusted earnings per share (EPS) of 9 cents, which missed the Zacks Consensus Estimate by 10%. The bottom line increased 125% year over year.
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Revenues rose 18.3% year over year to $106.9 million. Also, the top line surpassed the Zacks Consensus Estimate by 2.8%. Revenues for the quarter reached its highest quarterly level since the fourth quarter of 2014.
CRNT’s Key Growth Catalysts
Ceragon is making significant strides in capturing market share in high-growth areas such as millimeter-wave products and private networks. It is also focused on driving recurring revenues.
CRNT introduced several innovative millimeter-wave products, including the IP-50CX and IP-50EX. These advancements highlight Ceragon’s efforts to capitalize on the increasing demand for high-performance wireless technologies, strengthening its competitive edge in the market. The IP-50EX is already generating strong demand in key markets like India. It expects IP-50CX to aid in gaining more business, especially in India.
CRNT is already promoting its first Neptune-based product, the IP-100E. This product is intended to deliver 25Gps capacity in a single box with a reduction in costs.
It also has launched the new product version of the Siklu By Ceragon product, highly awaited by Ceragon customers. It is also advancing work on a new split-mount product, which is expected to be launched commercially within the first half of 2025.
Ceragon Networks Stock Price, Consensus and EPS Surprise
Ceragon Networks Ltd. Price, Consensus and EPS Surprise
The launch of the Smart Activation Key will offer more flexibility and ease of use of different features and configurations of its products. This, in turn, is likely to promote a software-as-a-service business model for CRNT.
In the last reported quarter, Ceragon secured $7 million in annual recurring revenue (ARR) from managed services. This move toward managed services and software-based business models positions Ceragon for steady, ongoing revenue growth.
The company is diversifying its business into private network business. It reported a 50% increase in bookings from private networks in 2024. CRNT recent acquisitions of Siklu and End 2 End Technologies, LLC are expected to boost the competitive edge in the private network business. End 2 End Technologies is a leading systems integration and software development company in the United States, while Siklu provides “multi-gigabit wireless fiber” connectivity in urban, suburban and rural areas of North America.
Strategic Position in India: Another Tailwind for CRNT
Healthy demand for its solutions in India is another plus. Revenues from India were $55.6 million, accounting for nearly half of the overall revenues in the fourth quarter. This growth reflects Ceragon's solid position in the Indian telecommunications market, which is expanding rapidly as it upgrades to 4G and 5G infrastructure. Visibility in the region is improving as commercial terms for 2025 are being finalized with two major customers. Demand for high-capacity wireless products, particularly microwave and E-Band solutions, is expected to rise significantly in 2025 in India.
Ceragon’s Strong Profitability Metrics
Improving top-line performance is positively impacting profitability. Non-GAAP gross profit increased 15.5% to $36.7 million on a year-over-year basis. Non-GAAP gross margin for the fourth quarter was 34.3% compared with 35.1% in the same period last year. Despite changes in the regional revenue mix, the company maintained gross margin by increasing revenues, continuously improving product costs and effectively managing fixed costs.
Adjusted operating income for the quarter was $12.2 million, up from $7.8 million.
CRNT’s Outlook
Management has provided revenue and operating margin guidance for 2025, projecting revenues between $390 million and $430 million, including contributions from the E2E acquisition. Non-GAAP operating margins are expected to be at least 10% at the lower end of this range, with improved free cash flow compared with 2024.
CRNT Faces a Few Challenges
Ceragon’s Communications Service Provider (“CSP”) business has been witnessing a slowdown since the past year. CRNT added it was starting 2025 with low visibility and that the potential recovery remains uncertain.
CRNT is facing a slowdown in certain public network domains outside of India, mainly due to a weak global macro environment. Moreover, it faces intense competition from Chinese players in Latin America, Africa and some parts of Asia-Pacific, leading to pressured revenues.
Volatile foreign exchange fluctuations and the strengthening of the U.S. dollar versus several currencies are additional concerns.
CRNT Stock Price, Estimates & Valuation
Ceragon shares have lost 24.4% in the past month, underperforming the Wireless-Non U.S. industry’s growth of 4.7%. Following the results announced on Feb. 11, shares have tanked 26.3%, wiping out all gains. It has also underperformed the Zacks Computer and Technology sector and the S&P 500 composite’s growth of 1.3% and 2.6%, respectively.
Price Performance
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The decline is in stark contrast to some of the notable peers in the same space. Ciena Corporation CIEN and Cisco Systems CSCO have gained 3.7%, and 5.7%, respectively. Extreme Networks, Inc. EXTR has declined 8.9% over the same time frame.
In the past 60 days, analysts have revised their earnings estimates down for the current quarter and current year.
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CRNT’s stock is trading at a premium, with a forward 12-month Price/Earnings of 9.46X compared with the industry’s 8.82X.
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Stay Invested in CRNT for Now
Focus on growth initiatives, including mmW products, Private Networks and Managed Services hold promise, but several challenges could put downward pressure on CRNT’s stock price. The slowdown of certain public network domains outside of India, the soft CSP market and integration risks from acquisitions remain concerns.
For now, holding CRNT stock remains the most prudent strategy, allowing investors to benefit from its growth prospects while navigating external risks.
Currently, CRNT carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here
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