Are HLIT's earnings surprises a new norm?

Harmonic's (HLIT) earnings surprises have been positive in recent quarters, indicating a potential new norm of consistent outperformance. 1. **Consistent Earnings Surprises**: Harmonic has experienced positive earnings surprises in multiple quarters. For instance, on February 10, 2025, Harmonic reported its financial results for the fourth quarter and fiscal year ended December 31, 2025. The Company forecasted EPS in the range of $0.02 to $0.08 on revenue of $120 million to $135 million for the first quarter of 2025, below analyst projections. However, on February 11, 2025, after the earnings release, Harmonic's stock price fell by 15.29%. This decline suggests that the market had high expectations, which Harmonic's guidance did not meet. |code|Ticker|Name|Date|Revenue Surprise|EPS Surprise|market_code| |---|---|---|---|---|---|---| |HLIT|HLIT.O|Harmonic|2024 Q1|360000|0.01|185| |HLIT|HLIT.O|Harmonic|2024 Q2|5080000|0.04|185| |HLIT|HLIT.O|Harmonic|2024 Q3|1.3866E7|0.04|185| |HLIT|HLIT.O|Harmonic|2024 Q4|9716000|0.08|185| 2. **Trend of Increasing ROCE**: Harmonic has shown a trend of increasing return on capital employed (ROCE), which is a positive indicator for the company's profitability and efficiency in generating profits from its capital base. The ROCE has risen substantially to 15% over the last five years, with an increase in the base of capital employed. This trend suggests that Harmonic is effectively reinvesting profits into the business, which can lead to continued growth and profitability. 3. **Analyst Expectations**: Analysts have been revising their expectations upward for both EPS and revenue, indicating a growing optimism about Harmonic's future performance. This revision in expectations can be a precursor to continued earnings surprises if Harmonic's performance continues to exceed forecasts. 4. **Legal and Regulatory Environment**: It is important to note that the investigation by Pomerantz LLP into potential securities fraud at Harmonic does not directly impact the company's earnings surprises. However, it does add a layer of uncertainty that could affect investor sentiment and potentially impact financial performance if it leads to legal costs or a loss of investor confidence. In conclusion, while past performance is not indicative of future results, the recent trend of positive earnings surprises, combined with Harmonic's strategic focus on increasing ROCE, suggests that the company may be moving towards a new norm of consistent outperformance. However, investors should remain vigilant about potential risks and regulatory developments that could impact the stock's performance.