Foolish Forecast: Ceragon's Emerging Growth

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Wireless network gear maker and Motley Fool Hidden Gems recommendation Ceragon Networks (Nasdaq: CRNT) will start next week with its second-quarter results before the market opens on Monday. Here's some Foolish thoughts to chew on over the weekend.

What analysts say:

• Buy, sell, or waffle? The analyst pool hasn't wavered much: Of the 12 analysts rating Ceragon, 10 still say buy and two say hold. The 1,509 members of the Motley Fool CAPS community who rate Ceragon are largely bullish, giving the company a top-notch five-star rating.
• Revenue. On average, analysts predict quarterly sales of $49.4 million, 32% over the same quarter last year.
• Earnings. Profits are expected to grow by about 18% to $0.13 per share.

What management says:
In Ceragon's last quarter, the company highlighted a regional shift in which U.S. customers, which include CellularOne and General Dynamics (NYSE: GD), were not contributing as heavily to revenue. CEO Ira Palti noted, though, that "demand in the Asia Pacific and EMEA [Europe, the Middle East, and Africa] regions more than offset the recent weakness in North America." Though Palti remains steadfast that Ceragon is in a sweet spot riding the demand for higher bandwidth, carriers in the U.S. such as Sprint Nextel (NYSE: S), Verizon (NYSE: VZ), and AT&T (NYSE: T) haven't been knocking as frequently on Ceragon's door, with purchase orders in hand.

What management does:
Ceragon is delivering on its commitment to both growth and a lean operating structure, and it shows in its margins' fantastic upward trend.

Margins	12/06	3/07	6/07	9/07	12/07	3/08
Gross	25.5%	26.5%	27.4%	29.1%	36.1%	35.9%
Operating	(6.2%)	(3.5%)	(1.5%)	0.2%	7.7%	7.7%
Net	(5.0%)	(2.6%)	(1.1%)	0.4%	8.1%	8.4%

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:
Since noting strong demand from Asia Pacific and emerging markets last quarter, Ceragon has piled on more deployment deals for backhaul solutions in India, Mexico, and the Dominican Republic. And the company is noting that these are multimillion-dollar contracts and extensions to top-tier customers such as America Movil (NYSE: AMX). While the WiMAX network ambitions of Clearwire and Intel (NYSE: INTC) may be slogging along in the U.S. at a less-than-desirable pace, emerging markets are racing to bring broadband wireless networks on line. With this level of market validation, it's likely the slack sales in the U.S. are only temporary.

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