Byrne Investment Research
We went 7-for-10 in terms of our earnings predictions last week, which led to a whopping return of 64%. This brought our year-to-date return for this newsletter in 2013 up to 214%.
Roper Industries (ROP) is one of our Top 10 mid-cap companies and we said it would beat estimates for the third quarter in a row. We were right. ROP reported 1Q 2013 non-GAAP earnings of $1.27 per share, beating the consensus estimate of $1.22 per share by five cents. ROP also increased its fiscal 2013 earnings outlook from $5.60 – $5.82 per share to $5.76 – $5.94 per share. Despite all this good news, the stock lost 4%.
Ecolab (ECL) is also one of our Top 10 mid-cap companies. We said ECL would miss the mean estimate for $0.59 per share and the stock would fall on the news. We were right. Sales increased 2% YoY to $2.9 billion, and net earnings soared 221% to $0.53 per share. Management increased its full-year earnings guidance to $3.45 – $3.55 per share, up from prior guidance of $3.38 – $3.48 per share. The stock fell less than 1% to $84 where we think it is a good buy for the long-term.
We called Martha Stewart Living (MSO) “one of the worst companies ever to come public.” We also said that, “We have no idea how much money MSO will lose this quarter because we do not trust the accounting, but we do know this company has zero value.” The quarter was another disaster. Total revenues declined 25% YoY to $37.2 million, and MSO posted an operating loss of ($3.0) million. The net loss was ($3.3) million, or ($0.05) per share, which beat the loss estimate for ($0.08) per share, but the company included a “net gain on the sale of a subscriber list of $2.7 million,” so it really missed estimates without this accounting trick. The stock lost 1% to $2.40, which is exactly $2.40 more than the stock is worth. This company is a complete sham.
We said Denny’s (DENN) is trying to complete a turnaround that it started three years ago when the company was mired in red ink. Progress has been slow, but there has been progress ― the company has posted small profits two years in a row. We said cost-cutting, less shares, and a lower tax rate would allow DENN to beat estimates by a penny. We were right. Although total operating revenue decreased 7% YoY to $115 million, cost cutting led to a 20% increase in net income to $7.1 million, or $0.08 per share, which beat estimates by two cents. The stock gained 1% after the report.
We said the transition to a new CFO, inefficiencies, plus the issues and costs associated with the FDA, would cause Anika Therapeutics (ANIK) to miss estimates this quarter. We were wrong. Revenue grew just 6% YoY to $15.2 million, but net income soared 63% to $3.1 million, or $0.21 per share, which beat estimates by four cents. The company had multiple manufacturing problems in the prior quarter that seem to be resolved much earlier that we thought. The stock rose 6%.
ExlService Holdings (EXLS) is a Top Recommendation from our firm. We did some digging into BPO software and we found conditions were very soft in the first three months of this year. This led us to believe that EXLS would miss the sell-side estimates for the quarter. Our estimate was $0.36 per share, or three cents below the mean estimate, and we said the stock would fall on the news. We were wrong, sort of. Revenues increased 11% YoY to $116 million, which missed the sell-side estimate by $2 million. Net income increased 10% to $9.8 million, or $0.40 per share, which beat estimates by a penny. The stock fell 8% on the news and it’s a great buy under $32.
Accelrys (ACCL) is a Top Recommendation. We said the company was going to miss estimates due to integration costs, which is exactly what occurred. Revenue increased 5% YoY to $43.9 million, which was about $2 million lower than sell-side estimates, but in line with our model. Non-GAAP net income fell 22% to $3.6 million, or $0.06 per share, which missed the sell-side estimate by two cents and our estimate by a penny. Management blamed the lower earnings on integration costs associated with five acquisitions made over the last two years, exactly as we predicted. Management lowered its guidance for fiscal 2013. Revenues are expected in the range of $176 – $181 million, down from prior guidance of $185 – $190 million. Net earnings are expected in the range of $0.32 – $0.34 per share, down from prior guidance of $0.36 – $0.39 per share. We said the stock would fall on the news, but it lost more than we expected. The stock lost a whopping 20% to $7.90. ACCL finished the quarter with $130 million in cash, or $2.34 per share. Backing out the cash, the stock is trading for 16 times the 2013 forecast. We recommend aggressive purchase of the stock under $8 because ACCL has the best technology for modeling and simulation, enterprise lab management, workflow and automation, and data management.
We said Callidus Software (CALD) would post a small profit this quarter and beat the $0.00 per share estimate by a penny. We noted that the company recently hired a new CFO that takes over in July 2013, and the stock is trading for 60 times the 2013 earnings estimate of $0.07 per share, which is too rich. Revenue increased 16% YoY to $25.5 million, but the company posted a non-GAAP net loss of ($0.8) million, or ($0.02) per share, which missed estimates by two cents. Plus, the company lowered guidance for the next quarter. Despite the terrible quarter, the stock rose 15%, which befuddles us. Take any gains (or losses) you have off the table.
We said Guidance Software (GUID) would miss the loss estimate for ($0.05) per share and the stock would fall on the news. We were right on both counts. Revenue increased just 4% to $26.9 million, which badly missed estimates by $3 million. On a non-GAAP basis, the company posted a net loss of ($3.9) million, or ($0.15) per share, which badly missed estimates by ten cents. The stock got whacked on the news, losing 27%.
We said Telular (WRLS) would beat the mean estimate of $0.11 per share by two cents. The company did not announce earnings because it received a buyout offer from Avista Capital Partners for $235 million, or $12.61 per share, a premium of 31% to its closing price on Friday. Several large shareholders immediately filed lawsuits against WRLS because they think the acquisition price is too low, so take your gains off the table.
Next week, we discuss 12 companies including five Top Recommendations in CCC, MTSC, FF, JBT, and SPA.
Get the full research report:
- Author: Thomas Byrne, Analyst
- Pages: 14
- Purchase Price: $ FREE
- Companies Mentioned In This Report: Calgon Carbon (CCC), Pegasystems (PEGA), Interactive Intelligence (ININ), MTS Systems (MTSC), Natus Medical (BABY), Biolase (BIOL), Future Fuel (FF), John Bean Technologies (JBT), Sparton (SPA), Globecomm Systems (GCOM), I.D. Systems (IDSY), USA Technologies (USAT)
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