Act Fast: 75 Only!
Sierra Wireless, Inc. (TSX:SW)(NASDAQ:SWIR), one of the world’s leading providers of fully integrated device-to-cloud solutions for the Internet of Things (IoT), announced its second-quarter earnings results after the market closed on Wednesday, and its stock reacted by making a sharp move to the downside in the extended-hours trading session. Let’s take a closer look at the quarterly results, its outlook on the third quarter, and the fundamentals of its stock to determine if we should consider using this weakness as a long-term buying opportunity.
A solid quarter of top- and bottom-line growth
Here’s a quick breakdown of 10 of the most notable financial statistics from Sierra Wireless’s three-month period ended on June 30, 2017, compared with the same period in 2016:
| Metric | Q2 2017 | Q2 2016 | Change |
| OEM Solutions revenues | US$144.56 million | US$132.67 million | 9% |
| Enterprise Solutions revenues | US$21.66 million | US$16.58 million | 30.7% |
| Cloud & Connectivity Services revenues | US$7.29 million | US$6.99 million | 4.3% |
| Total revenues | US$173.51 million | US$156.23 million | 11.1% |
| Adjusted gross profit | US$58.81 million | US$55.77 million | 7.2% |
| Adjusted gross margin | 34.5% | 33.8% | 70 basis points |
| Adjusted EBITDA | US$14.8 million | US$12.08 million | 22.5% |
| Adjusted earnings from operations | US$11.3 million | US$8.43 million | 34% |
| Adjusted net earnings | US$9.69 million | US$6.38 million | 52% |
| Adjusted earnings per share (EPS) | US$0.30 | US$0.20 | 50% |
Outlook on the third quarter
In the press release, Sierra Wireless provided its outlook on the third quarter, calling for revenues in the range of US$167-175 million and adjusted EPS in the range of US$0.17-0.25.
Should you buy Sierra Wireless on the dip?
It was a solid quarter overall for Sierra Wireless, and the results surpassed the consensus estimates of analysts polled by Thomson Reuters, which called for adjusted EPS of US$0.28 on revenue of US$170.27 million. Furthermore, its outlook on the third quarter came in line with analysts’ expectations, which currently call for adjusted EPS of US$0.24 on revenue of US$170.33 million.
Immediately following the earnings release, Sierra Wireless announced its acquisition of Numerex Corp. for approximately US$107 million. Sierra Wireless noted that this acquisition “accelerates our IoT device-to-cloud strategy by adding an established customer base, significant sales capacity, proven solutions, and recurring revenue scale.”
To summarize Sierra Wireless’s two press releases, the company beat second-quarter earnings expectations, provided guidance for the third quarter that was in line with expectations, and it announced a strategic acquisition of another leading provider of managed enterprise solutions that enables the IoT; I think all of these are positives for the company, so I do not think the sharp decline in its stock is warranted. Furthermore, the stock now trades at less than 27 times fiscal 2017’s estimated EPS of US$1.02 and less than 23 times fiscal 2018’s estimated EPS of US$1.18, both of which are inexpensive given its current earnings-growth rate and its estimated 13.1% long-term growth rate.
With all of the information provided above in mind, I think Foolish investors should strongly consider using the post-earnings weakness in Sierra Wireless to begin scaling in to long-term positions.
