NETGEAR (NTGR) Up 9.7% Since Last Earnings Report: Can It Continue?

A month has gone by since the last earnings report for NETGEAR, Inc. (NTGR). Shares have added about 9.7% in that time frame, outperforming the S&P 500.Will the recent positive trend continue leading up to its next earnings release, or is NETGEAR 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. NETGEAR Q3 Earnings and Revenues Top EstimatesNETGEAR reported third-quarter 2024 non-GAAP earnings of 17 cents per share, which beat the Zacks Consensus Estimate of a loss of 4 cents. The company had reported non-GAAP earnings of 23 cents in the year-ago quarter. NETGEAR generated net revenues of $182.9 million, beating the consensus estimate by 4.5%. The figure also beat the guidance of $170- $180 million. Revenues improved 27.1% sequentially. But the metric was down 7.6% on a year-over-year basis. The company completed a successful destocking plan, leading to a $27 million reduction in inventory in the third quarter. This is expected to help it to align sell-in with sell-through with channel partners, thereby increasing revenue predictability. NETGEAR also witnessed a 22% spike in recurring revenues in the quarter under review. It now has 555,000 recurring subscribers. Region-wise, net revenues from the Americas were $127.8 million (70% of total revenues), down 9.4% year over year. Europe, the Middle East and Africa generated revenues (18%) of $32.8 million, down 8.1%. Revenues from the Asia Pacific region (12%) increased 5.5% year over year to $22.3 million.Segmental DetailsCHP segment (which includes Orbi, Nighthawk and Armor brands) generated revenues of $104.3 million, down 18.1% year over year but up 24.1% sequentially. The segment continues to witness strength in the premium products portfolio and saw positive demand trends for new M7 Pro mobile hotspots and Nighthawk products. Revenues from the Service provider channel were $22.9 million, gaining from the earlier launch of M7 Pro mobile hotspots. Driven by ongoing momentum for ProAV managed switch products (which grew in double digits year over year), revenues from NFB unit jumped 11.4% year over year and 31.2% sequentially to $78.5 million.Adjusted gross margin decreased to 31.1% from 35% year over year. Non-GAAP operating income was $1.6 million compared with operating income of $5.3 million in the year-ago quarter.Non-GAAP operating expenses were $55.3 million, down 13.7%.Cash Flow & LiquidityFor the quarter ended Sept. 29, 2024, NETGEAR generated $107.7 million in cash from operations. It also had $395.7 million in cash and cash equivalents and short-term investments and $271.4 million of total current liabilities. The strong cash balance was driven by a litigation settlement with TP-Link. The company repurchased 99,000 shares worth $1.5 million in the quarter under review due to trading restrictions. The company has 3.8 million shares left under existing authorization and it expects to resume buyback in the fourth quarter.Q4 GuidanceManagement projects net revenues in the band of $160-$175 million. The company expects to see more predictable performance following the completion of destocking for NFB and CHP businesses. NETGEAR added that while the market is showing signs of recovery, the company expects higher promotional activity due to the holiday season within the retail business for its CHP segment. It anticipates revenues from the service provider channel to be nearly $20 million in the fourth quarter, slightly down sequentially, owing to the earlier launch of the M7 Pro mobile hotspot. Gross margins and operating margins are likely to remain affected by ongoing inventory reduction efforts and elevated transportation costs, including those related to the Red Sea shipping crisis.GAAP operating margin is forecasted to be between (12.4)% and (9.4)%. Non-GAAP operating margin is estimated in the band of (8)-(5)%.GAAP tax benefit is expected to be between $2 million and $3 million, with a non-GAAP tax benefit projected to be between breakeven and $1 million for the fourth quarter of 2024.How Have Estimates Been Moving Since Then?It turns out, fresh estimates flatlined during the past month.VGM ScoresCurrently, NETGEAR has a great Growth Score of A, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.OutlookNETGEAR has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.Free Today: Profiting from The Future’s Brightest Energy SourceThe demand for electricity is growing exponentially. 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