Earnngs Preview: CommScope

CommScope (CTV) is expected to report Q2 earnings after market close Tuesday July 29, with a conference call scheduled for 5:00 pm ET.

Guidance

The consensus estimate is 87c for EPS and $1.08B for revenue, according to First Call.

Analyst Views

Guidance from the last earnings call for Q2 is revenue of $1.05B to $1.09B and FY08 revenue of $4.1B to $4.3B. Stifel believes that CTV faced no unforeseen headwinds that prevented it from reaching its 2Q08 operating profit forecast of $135M to $145M, vs. its forecast in the middle of CTV's guidance. Stifel's Q2 sales forecast is +9% sequentially from 1Q08 at $1.095B. Competitors Anixter (AXE) and Belden (BDC) have reported 10% and 8.6% sequential sales increases in Q2. Stifel believes that wireless demand is strengthening and that this should help the former Andrew operations in terms of operating leverage and better pricing. The firm said that the enterprise segment at CTV does not have the same tough YoY comparison in Q2 that it faced in Q1. Also, Stifel's Q2 forecast reflects weak Broadband sales and profits. This is the only area it believes is experiencing soft demand.

Regarding the outlook, Stifel expects CommScope to achieve strong EPS in the second half of 2008. The majority of the $50M to $60M in cost reductions fall 2H08. Stifel said the Q2 price increases will have the greatest impact in 2H08. The firm sees the Andrew operations as having a stronger second half than first half. Stifel believes the wireless industry appears to be experiencing a global upturn. Other companies in the space are reporting that favorable Q2 market trends will likely continue through year-end 2008.

Key issues for the earnings call: Forward guidance; and an update on the company's announced streamlining of its businesses and workforce layoffs