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On Tuesday, B.Riley adjusted the price target for Aviat Networks (NASDAQ:AVNW) to $35.00, down from the previous $42.00, while keeping a Buy rating on the stock. The revision follows Aviat Networks' fourth-quarter earnings report, which was released last Friday. The company posted revenue of $116.7 million with earnings per share (EPS) of $0.72, surpassing the consensus estimates of $112.9 million in revenue and an EPS of $0.69.
The year-over-year revenue growth of 28.1% was primarily attributed to the acquisition of Pasolink. North American revenue saw a modest increase of 2.5%, totaling $56.2 million, and international revenue jumped 66.6%, largely due to the same acquisition. Gross margin (GM) improved slightly to 35.9% from 35.2% in the third quarter. However, operating expenses rose to $31.3 million from $28.5 million, and operating margin (OM) decreased to 9.1% from 9.7%.
Aviat Networks' adjusted earnings before interest, taxes, depreciation, and amortization (AEBITDA) remained steady quarter-over-quarter at $11.9 million. The company provided a forecast for fiscal year 2025, projecting revenue between $450 million and $490 million and AEBITDA between $46 million and $52 million, which is below the consensus expectations of $484 million in revenue and $59 million in AEBITDA. This outlook suggests a 15% annual growth in revenue but nearly flat AEBITDA year-over-year.
Two quarters ago, Aviat had anticipated fiscal year 2025 revenue to be in the range of $515 million to $520 million. The updated guidance suggests potential softness in North American Tier-1 and African markets in the first half of the fiscal year. The company also reported that the impact of previously disclosed accounting errors was not material, but visibility into demand from North American Tier-1s and Africa might have worsened recently, with expectations of improvement in the second half of the fiscal year.
In response to these developments, B.Riley has revised its fiscal year 2025 EPS and AEBITDA estimates for Aviat Networks from $3.15 and $54.0 million to $2.81 and $48.7 million, respectively. The new price target of $35 is based on a cash-adjusted price-to-earnings (P/E) multiple of 12x, down from the prior multiple of 13x, applied to the revised FY25 EPS estimate. Despite the lowered forecasts and price target, B.Riley maintains its Buy rating on the stock, citing valuation as the rationale.
In other recent news, Aviat Networks has experienced significant developments. The company's fourth-quarter sales report surpassed its preliminary guidance, and it has provided an optimistic fiscal year 2025 guidance, projecting revenues between $450 million and $490 million. This projection indicates a year-over-year increase of 15%, with organic growth ranging from 0% to over 3%. Aviat Networks' Pasolink product line, in partnership with NEC, shows promising improvements in sales and gross margins, potentially leading to an annual exit rate nearing $4.00 in earnings per share for fiscal year 2025.
However, Roth/MKM has revised its price target for Aviat Networks to $43.00, down from the previous $51.00, while maintaining a Buy rating. Similarly, B.Riley has cut its stock price target from $55.00 to $42.00 due to identified financial reporting issues, but the Buy rating remains unchanged. The company's recent acquisition of Pasolink and the subsequent 15-day extension granted to finalize its financial reports for fiscal year 2024 have led to these adjustments.
B.Riley has also revised its earnings per share and adjusted earnings before interest, taxes, depreciation, and amortization forecasts for fiscal year 2025, reducing the estimates from $3.61 to $3.15, and from $61.0 million to $54.0 million, respectively. Despite these changes, both Roth/MKM and B.Riley maintain a positive outlook on Aviat Networks' future.
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