The market will get to hear the latest from Motley Fool Hidden Gems recommendation and wireless network solutions provider Ceragon Networks (Nasdaq: CRNT) this Friday. Let's see what may become of earnings in Ceragon's first quarter.

What analysts say:

  • Buy, sell, or waffle? Of 12 analysts rating Ceragon, 10 say buy and two give it a hold rating. The company holds a top-notch five-star stock rating in the Motley Fool CAPS community, with more than 1,420 opinions given.
  • Revenue. On average, analysts predict quarterly sales to rise 36% over the same quarter last year, to $46.2 million.
  • Earnings. Profits are expected to grow even faster, to $0.13 per share.

What management says:
With a stock that's been trending downward over the past several months, many investors -- including this Fool -- have been wondering what's going on at Ceragon. But as we often emphasize here at the Fool, the stock doesn't tell you anything fundamentally about a company, which is why you shouldn't base decisions on stock movement.

Little has changed in outlook for the company as service providers such as Verizon Wireless -- a joint venture of Verizon Communications (NYSE: VZ) and Vodafone -- and AT&T (NYSE: T) will be driving demand for broadband backhaul solutions. In its last earnings report, Ceragon President and CEO Ira Palti noted that "the primary growth drivers for high-capacity wireless backhaul remain in place and we have a large pipeline of opportunities. We are looking forward to another year of growth in 2008."

What management does:
In the recent quarter, margins remained strong as the company kept a lean structure.

Margins 

9/06

12/06

3/07

6/07

9/07

12/07

Gross

34.9%

25.5%

26.5%

27.4%

29.1%

36.1%

Operating

2.3%

(6.2%)

(3.5%)

(1.5%)

0.2%

7.7%

Net

(4.0%)

(5.0%)

(2.6%)

(1.1%)

0.4%

8.1%

All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
Ceragon's growth potential is strongly tied to the broadband upgrade cycle that has telecom operators around the world boosting capacity in their networks. Uncertainty about the pace of Clearwire (Nasdaq: CLWR) and Sprint Nextel's (NYSE: S) WiMAX rollout has hurt Ceragon, but lackluster outlooks from other network equipment providers such as Nokia (NYSE: NOK) and Siemens' joint venture and Alcatel-Lucent (NYSE: ALU) have also had investors hedging on Ceragon's prospects.

But network expansion concerns are near-term in nature -- adding broadband capacity to wireless networks around the world is just a matter of when. So the long-term possibilities with Ceragon are still there if the company can position itself to capture a good portion of this business, as it has done in the past.

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