Why Vonage Holdings, Inc. Rose Today

By Anders BylundMarketsFool.com

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What happened

Shares of Vonage Holdings (NYSE: VG) rose as much as 18.1% higher on Wednesday morning, lifted by a surprisingly strong third-quarter earnings report.

So what

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Vonage's sales increased by 11% year over year, landing at $248 million. Adjusted earnings per share jumped from $0.05 to $0.09, as non-GAAP net income rose 73% higher.

The operator of cloud-based communications services crushed Wall Street's earnings targets while edging out revenue estimates. Analysts would have settled for earnings of roughly $0.05 per share and sales in the $247 million neighborhood.

Now what

Consumer service sales continued to shrink, falling 14% year over year in a planned strategy shift. Vonage is focusing tightly on the more lucrative business-grade segment, where revenue jumped 86% higher. The more profitable product mix helped Vonage beat earnings targets in the third quarter, and the company also raised its full-year operating income guidance by approximately 6%.

Vonage is on a more profitable track under this new strategy, and should continue to boost bottom-line profits as long as management can execute on the new plan.

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Anders Bylund has no position in any stocks mentioned. The Motley Fool once recommended Vonage to subscribers, but that was a long time ago. The Fool no longer has any position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.