November 7, 2012
Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of Sonus Networks (Nasdaq: SONS ) felt the pain today, falling more than 10% in the afternoon after trading was halted in the morning.
So what: Sonus beat analyst estimates for adjusted EPS, with a $0.02 loss half of what was expected. However, revenue dipped from the year-ago quarter and also slid a hair under the analyst consensus, with $57 million even on the third-quarter report against a $57.1 million expectation.
Worse, Sonus now expects much lower revenue and earnings for the upcoming fourth quarter. Its guidance for that quarter calls for a $77 million to $81 million revenue range and either breakeven or $0.01 in EPS. Analysts were looking for $93.7 million on the top line and $0.03 on the bottom line, so this disappointed the Street quite a bit. The company's one bright spot on forward guidance is that its full-year EPS losses are now projected to be between $0.06 and $0.07, which is slightly better than the $0.08 consensus. However, Sonus' $256 million to $260 million in full-year revenue guidance is well below the $272.8 million Wall Street was looking for.
Now what: With no projected profitability on the horizon, it seems futile to invest in Sonus at the moment. The company's free cash flow levels have also been negative so far in 2012, so there's not much of a silver lining to look forward to. At this point, it seems better to watch this stock's story unfold from the sidelines.
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