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Why Ribbon Communications Stock Briefly Popped This Morning

By Evan Niu, CFA - Aug 6, 2020 at 1:37PM

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The networking company reported second-quarter results and a divestiture.

What happened

Shares of Ribbon Communications (RBBN 1.85%) briefly popped this morning, rising as much as 19% in morning trading, after the company reported second-quarter earnings. The stock has since given most of those gains back and is up just 1% as of 12:50 p.m. EDT.

So what

Revenue in the second quarter increased 45% to $210 million, with approximately $64 million of those sales attributable to the recent acquisition of ECI Telecom, which closed in early March. That resulted in adjusted earnings per share of $0.06, compared to the $0.05 per share in adjusted profits that analysts were expecting.

Ribbon Communications logo

Image source: Ribbon Communications.

"Demand for our industry leading voice-over-IP real-time communications solutions was strong as service providers and enterprises continue to increase capacity to support work-from-home communication and collaboration needs," CEO Bruce McClelland said in a statement. "We also began to see a recovery in our Packet Optical business compared to our first quarter 2020 as customers restarted delayed projects and initiated new deployments."

Now what

The networking technology company also announced that it is divesting its Kandy Communications platform in an all-stock deal. Ribbon will sell the division to American Virtual Cloud Technologies, or AVCtechnologies, in exchange for 13 million shares. That deal is expected to close in the second half of the year.

Ribbon's guidance for the third quarter calls for revenue of $210 million to $220 million, with adjusted earnings per share of $0.05 to $0.07. Consensus estimates call for $231.3 million in sales and adjusted EPS of $0.07. The outlook does not incorporate the effects of the proposed Kandy sale.

Evan Niu, CFA has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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Ribbon Communications Inc. Stock Quote
Ribbon Communications Inc.
$3.30 (1.85%) $0.06

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