Comtech Telecommunications Corp. (CMTL) shares are slipping Wednesday after the company announced it's selling most of its Satellite and Space Communications segment to Gilat Satellite Networks Ltd. (GILT) for $157.5 million. The move is part of a broader strategy to focus on its public safety technology business, Allerium, as it transitions to that name.
After transaction-related expenses, Comtech expects net cash proceeds of roughly $143 million to $145 million. The company says it will use that money primarily to pay down debt and shore up its balance sheet. The deal is expected to close in the fourth quarter of calendar 2026, pending regulatory approvals.
This sale marks a significant milestone in Comtech's transformation. The company is essentially betting its future on Allerium, which provides critical communications technology for public safety agencies. It's a pivot away from the satellite and space communications business that has been a major revenue driver.
Earnings Snapshot: Beat on Losses, Miss on Revenue
Comtech also reported its latest quarterly results. The company posted an adjusted loss of 22 cents per share, which was better than Wall Street's estimate of a loss of 27 cents. So that's a win on the bottom line.
But revenue was a different story. Sales fell 16.4% year over year to $106 million, missing the analyst consensus of $110.2 million. Gross profit came in at $36.1 million, or 34% of sales, compared with $38.9 million, or 30.7% of sales, a year earlier. So margins actually improved even as revenue declined.
Operating loss widened to $3.1 million from $1.5 million in the prior-year quarter. On the cash flow front, Comtech generated $6.1 million in operating cash flow during the quarter, marking its fifth consecutive quarter of positive operating cash flow. Funded backlog stood at $696.1 million, while revenue visibility totaled approximately $1.1 billion.
Technical Picture: Below Moving Averages, Momentum Fading
Comtech's stock is trading at $2.99, which is significantly below its moving averages. It's 35.9% below the 20-day simple moving average (SMA) of $4.66 and 27.9% below the 50-day SMA of $4.14. The moving average convergence divergence (MACD) is below its signal line, indicating that momentum is fading after a recent upswing. That suggests upside pressure is cooling unless the stock can reclaim that baseline.
Key resistance sits at $4.66, aligning with the 20-day SMA, which could act as a barrier to upward movement. Key support is at $3.00, a level where buyers have previously stepped in, making it a critical point for maintaining any upward momentum.
What Comtech Does
Comtech Telecommunications provides communications technology and solutions. It operates in two reportable business segments: Satellite and Space Communications and Allerium. The Satellite and Space Communications segment, which generates the most revenue, includes satellite modem and amplifier technologies, troposcatter technologies, cybersecurity training, and space components. With the sale of that segment, the company will essentially become Allerium, focused on public safety.
Looking Ahead: Next Earnings Report
Investors are already looking ahead to the next earnings report, expected on November 9, 2026. Analysts are estimating a loss of 23 cents per share, which would be an improvement from a loss of 25 cents a year ago. Revenue is expected to come in at $113.51 million, down from $130.37 million in the same quarter last year.
CMTL Price Action: Comtech shares were down 11.04% at $2.66 at the time of publication Wednesday, according to market data.
