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In the world of the free markets, one man stands above all others. He is a behemoth. He is colossal. The volatility in the market appears no more frightening than an early autumn monarch butterfly. When he goes to Burger King, he orders two cheese double whoppers (followed by a vanilla shake). When he goes to the gym, the girl at the front desk gives him two towels. When he goes to Vegas he always splits aces and eights.
How can one man be so HUGE? What other adjective can be left to describe someone who now has 75 consecutive profitable trades of 15% or better. How can this be? How can this continue in such unfettered fashion?
Today I sold CMTL at 40.50. That’s a 20% gain over my (split adjusted) purchase price of 33.70. During the same period, the S&P 500 was only up 3.5%. So who is superior? The facts are plain as day. $$$MR. MARKET$$$ is the greatest stockpicker on the planet. Can you do that? You? You?? YOU??? I can’t LOSE! CANT LOSE!!! Drinking machine!!
To the market I say:” You sees? You sees what you get when you mess with $$$MR. MARKET$$$?”
The most excellent news is that there will be another $$$MR. MARKET$$$ winner forthcoming shortly. But you will not get one unless you tell me how great $$$MR. MARKET$$$ really is.
So let’s hear it!
I am HUGE! Bring me your finest meats and cheeses.
$$$MR. MARKET$$$
================================================== =============
03-29-2005, 09:59 AM
mrmarket
Administrator Join Date: Sep 2003
Posts: 1,420
CMTL ==> The Spring Break Winner
--------------------------------------------------------------------------------
You’ve just sipped your last drip of coffee from your cup and you lean back in your chairback and insert a toothpick into your mouth. Your mind wanders as you recollect the juicy thick rib-eye steak, prefaced with broccoli cheese soup, that you had the pleasure of consuming. All of a sudden, a strange, but somehow familiar, aroma snaps you out of your blissful stupor. Then your dinner guests begin the chain of denial:
The established order is;
"Whoever smelt it dealt it"
"Whoever denied it supplied it"
“Whoever ignored it stored it”
"Whoever made the rhyme committed the crime."
Passing gas, cutting the cheese, dropping an f-bomb, ripping one— call it what you want, but farts are a part of everyday life for men and women. How shall thou deal with the foul smell and sometimes obvious sound of flatulence? This question, like many others, has no one answer.
Strategies for Concealing: If you must hide it, you have several options. In public places like grocery stores, movie theaters and shopping malls, I recommend “crop dusting.” Simply unload and move on. Whoever comes to the drop site will be blamed and surprised. The old phrase, “Whoever smelt it dealt it” just isn’t always true. Be advised that not all farts are “crop dusting” material. Some will leave residual scents around you—these are the dreaded “farts that follow.”
The fact that these inherently tautological statements, and tactics, seem to conflict with one another would indicate that we have not yet advanced our telecommunications skills to the point where this information can be distilled into facts we can all find useful.
That’s why we need a company like COMTECH Telecommunications(CMTL). Comtech designs, develops, produces and markets innovative products and services for advanced telecommunications solutions.
Today I bought CMTL at 50.55. I will sell it in 4 to 6 weeks at 58.37. Here’s why I like CMTL:
CMTL’s stock is up over 230% in the last 12 months. Despite this remarkable runup, its PE is only 26.7. There’s a lot more room for its price to climb.
Yes indeed…very beautiful.
Comtech has grown substantially in recent years as evidenced by net sales increasing from $30.1 million in fiscal 1998 to $119.4 million in fiscal 2002 and $223.4 million in 2004. This growth has occurred within internal operations, as well as through acquisitions. More than 275 distinct Comtech products are in service in over 100 countries. They have the leading market share of satellite earth station modems and are overall leaders in the market segments that they serve.
With a leading-edge portfolio of product offerings, a focus on our core businesses, a dedicated and talented employee base and strong financial condition, Comtech is well positioned to be a market leader in the business segments they serve. They have demonstrated a consistent track record of delivering strong financial results. Comtech also has over $160 million in deployable cash for earnings accretive acquisitions.
Comtech is broken up into 3 operating groups:
• TELECOMMUNICATIONS TRANSMISSION
• RF MICROWAVE AMPLIFIERS
• MOBILE DATA COMMUNICATION
TELECOMMUNICATIONS TRANSMISSION
The telecommunications transmission segment provides sophisticated products and systems for voice, video and data transmission in satellite, over-the-horizon microwave and wireless line-of-sight telecommunication systems. Look at our world economic infrastructure. If anyone thinks that video and data transmission aren’t going to experience phenomenal growth in the next decade, then they’ve been spending too much time sniffing fumes at the dinner table.
CMTL has the #1 market positions in three product areas within the Telecommunications Transmission segment – satellite earth station modems, forward error correction technology and over-the-horizon microwave systems. The key enabling technologies are protected by patents, as well as solid reputations for performance and quality.
CMTL’s Turbo Product Coding technique has become the standard in optimizing bandwidth utilization. The world’s appetite for bandwidth goes on unabated. The Turbo Product Code chip runs at 311 megabits per second which makes it the fastest stand alone error correction integrated circuit in the world. If you are the best at something, it means you know how to manage excellence. Comtech offers a complete line of satellite earth station products, so they have become a “one stop shop” for all users of satellite systems and network integrators.
The subsidiaries in the telecommunications transmission segment serve a diverse group of customers including Northrop Grumman, BP Amoco, Exxon, AT&T, Hughes Network Systems, Globecomm Systems and the U.S. Government.
RF MICROWAVE AMPLIFIERS
The RF Microwave Amplifiers segment is a leading independent supplier of broadband, high-power, high performance RF microwave amplifiers used in sophisticated applications, including aircraft air-to-ground satellite communications, medical oncology systems, instrumentation and a variety of defense applications.
Comtech’s amplifiers are used to amplify signals carrying voice, data and fax transmission for air to satellite to ground communications. These amplifiers can provide passengers on an airplane with e-mail, Internet access and video conferencing.
Comtech’s solid-state high-power amplifiers are extremely complex and critical to the performance of the systems that they are incorporated into. Because of their technological complexity and importance to the performance of the larger system, most companies prefer to manufacture these products in-house. As a result of Comtech’s in-house engineering and contract manufacturing capabilities, their RF Microwave Amplifiers segment has become an independent outsourcing alternative. Customers, among others, who currently outsource RF microwave amplifiers work to Comtech, include: Rockwell Collins, Raytheon, Thales, Lockheed Martin, Northrop Grumman and Siemens Medical Systems. As the economy recovers and changes, the trend towards outsourcing the contract manufacturing will continue, which will
grow CMTL’s customer base.
Here’s what one of them looks like:
I don’t know about you, but I wouldn’t put my finger in it.
MOBILE DATA COMMUNICATION
Comtech’s Mobile Data Communications Services segment provides satellite-based mobile data communication services for the government and commercial markets. They provide mobile terminal units and message communication services to the US Army and other military commands. Comtech first emerged as a leader among providers of mobile data communications systems in 1999, when Comtech was selected to provide the Army Logistics Command's Movement Tracking System (MTS).
The technology used in the MTS system provides the Army Logistics Command with a better, more cost-effective way of monitoring and maintaining two-way communications with mobile military assets around the world. It makes possible rapid, secure, real-time communications with vehicles, ships and aircraft. This two-way communication can be between headquarters, a temporary location or between vehicles using satellite, terrestrial or internet-based communication methods.
Our brave men and women protecting us overseas need the best of the best in technology and they are getting it in a big way. Uncle Sam has been camping out in Comtech’s backyard and they are deploying these services which has been generating big bucks for Comtech. Like it or not, there is no foreseeable end to this requirement.
Developed initially for the U.S. Army and also available to commercial customers, Comtech's product is dome-shaped and about the size of an old-fashioned breadbox. Logistics personnel communicate back and forth via two-way text messaging with the vehicle's crew about their location, environmental conditions and diversions from scheduled routes, and can redirect the shipment to where it's most urgently needed at the time. "The Army has needed a capability to track the location of vehicles as well as the critical supplies they transport, communicate with vehicle operators, and redirect movements based on changing battlefield requirements," said Lt. Col. James Bass, the Army's MTS product manager. "This next generation Movement Tracking System provides greater visibility of supplies and ultimately more effectively supports the war fighter at the tip of the spear."
The Army's Movement Tracking System product office has fielded about 7,000 of the previous version of the MTS product, including 4,000 in Iraq, and has plans to order another 12,000 of the RFID integrated units, according to Bass. Comtech, which has provided satellite-only MTS units for the military over a number of years, is the sole supplier to the U.S. Army for the Movement Tracking System. Designed for the U.S. Army and also available to commercial customers, Comtech's MT-2012 is a mobile, two-way text messaging system designed to track vehicles and communicate with their crews while on and off the road. This system is the leading satellite-based mobile data communication system employed by both the US Army warfighter and logistics commands that operates in the L-band frequency range and has near real-time messaging and location tracking of mobile assets. You want to know where the Humvee went, now it’s easy to find it.
The embedded GPS receiver provides automatic "hands free" position reports and other messages, such as location, environmental conditions and emergency information. Despite the significant increase in revenues in this segment over the past few years, this technology has only been installed in a small number of the total logistics and warfighter vehicles that the US Army would like to equip. Sounds like an enormous upside to me. Comtech is the sole provider of the US Army logistics command’s Movement Tracking System and their contract allows for the purchase of equipment and services over an 8 yr period ending in 2007.
Another new opportunity is the enhancement of a government nomenclatured line-of-sight microwave system to which Comtech has added their over the horizon microwave capability. Comtech has announced that their system is being tested and that if the US Government decides to proceed, and obtains funding for these programs, that Comtech’s revenue base could “grow dramatically”. I am certain that Comtech wouldn’t stick their neck out like that and make this kind of statement unless there was some beef already behind it.
Great products, great outlook. How does it translate into earnings for Comtech? I’m not going to sugarcoat it. CMTL is making a ton of money right now because they service our US Defense interests in the Middle East right now. As optimistic, and hopeful, as I am that there will be an end to hostilities someday, I just don’t see it happening right now. Quarterly sales in the mobile data communications segment are expected to increase dramatically for the remainder of fiscal 2005 as deliveries occur on recently received orders, as well as pending orders, from the U.S. Army.
On March 9, 2005 Comtech reported record results for the second quarter of fiscal 2005. Sales, operating profit, EBITDA, net income and diluted earnings per share shattered all previous highs. The Company also announced that its Board of Directors has approved a three-for-two stock split to be effected in the form of a stock dividend.
Quarterly sales soared past the $70 million mark for the first time in the Company's history. Net sales for the three months ended January 31, 2005 were $78.1 million compared to $56.8 million for the three months ended January 31, 2004. Strong increases in sales were experienced in all three business segments.
Net income of $10.2 million, or $0.59 per diluted share, for the three months ended January 31, 2005 was nearly double the $5.2 million, or $0.34 per diluted share, for the three months ended January 31, 2004. The diluted earnings per share amount for the second quarter of fiscal 2005 reflects $0.05 of dilution in connection with the required adoption of new accounting rules regarding the impact of contingently convertible debt on the calculation of diluted earnings per share.
The second quarter results were impacted by favorable adjustments to certain long-term contracts in our telecommunications transmission and mobile data communications segments which reflect continuing positive trends in our performance on these contracts, as well as increased funding on the Movement Tracking System contract with the U.S. Army. Net sales in CMTL’s mobile data communications segment were $29.8 million and $18.4 million for the three months ended January 31, 2005 and 2004, respectively, an increase of $11.4 million or 62.0%. The substantial increase in revenues was primarily due to increased demand and continued deployment of Comtech technology by the U.S. Army.
Net sales for the six months ended January 31, 2005 were $134.2 million compared to $113.1 million for the six months ended January 31, 2004. Net income for the six months ended January 31, 2005 was $17.3 million, or $1.02 per diluted share, versus $11.0 million, or $0.71 per diluted share, for the six months ended January 31, 2004.
Backlog as of January 31, 2005 remained strong at $159.0 million. Bookings for the three and six months ended January 31, 2005 were $74.4 million and $209.6 million, respectively.
The additional shares relating to the stock split will be issued on April 4, 2005 to stockholders of record on March 21, 2005. Don’t you just love getting in before a split?
So now what’s the $64,000 question. Everyone should know by now that what makes a stock price go is earnings earnings earnings. Where are CMTL’s earnings going? Let me tell you.
ANAL-ysts say that CMTL will earn $1.85/share for 2005. At today’s PE of 27, that projects to a stock price of $49.95, right around where I bought it. Makes sense I guess. Now let’s take a look at the quarterly earnings for 2005 so far this year. First quarter was $0.49 and 2nd quarter was $0.59/share. So that means so far this year we are already at $1.08/share. In order for CMTL to come in at $1.85/share, that means that for the remainder of 2005, they will need to earn only $0.77/share, or average $0.38/share per quarter. Someone please tell me what kind of crack these ANAL-ysts are smoking?? Whoever denied it, supplied it?
Any 6 yr old can follow this trend. I’ve already explained where the earnings are going to come from. Their backlog of $159 million in orders is equal to more than 6 months of revenue. CMTL’s 5 year sales growth is 31.4%. This compares to Motorola’s -3%, Nokia’s 13% and Qualcomm’s 7%. CMTL will easily pick up ANOTHER $1.44/share for the remainder of 2005 which means they will net $2.52/share for 2005. If you use today’s PE of 27, that will get CMTL’s stock up to $68.04 (pre-split). I’m likin it. You? You?? YOU???
This is a transformational story. It doesn’t make any sense to look at CMTL in its 1999 mode of operation. It’s a whole new world out there and CMTL is in it. I don’t think that the ANAL-ysts have caught on yet. That’s ok, I’ll take their money too. Comtech’s operating income as a percentage of sales was 14.6% in 2004 vs. 9.7% in 2003. With revenues projected to grow, much more of these sales will fall to the bottom line leading to even better earnings growth. The siginificant sales growth in 2004 was driven by strong demand for their products. Wait til they start jacking up their prices!
Their net margins of 11% are more than double what they were in 2001. Current assets have grown from $104 million to $294 million while current liabilities have only moved from $37 million to $74 million. CMTL’s balance sheet is in great shape.
Here’s what the boss, Fred Kornberg, had to say:
"We handily beat our revenue and EPS guidance and achieved strong operating results, as evidenced by record levels of net income, earnings per share and EBITDA, all while significantly increasing our R&D spending and absorbing increased operating expenses, many of which are fixed. These expenses are expected to be leveraged over a greater revenue base for the balance of the year."
"We generated more than $20 million in cash flow from operating activities during the quarter as we collected a significant amount of receivables on a large over-the-horizon microwave contract as it neared completion."
"The receipt of a $77.0 million over-the-horizon microwave contract in September, the strong bookings in our mobile data communications segment over the past few months and continued strong demand for our satellite earth station products have set a strong foundation for record results in fiscal 2005. Looking ahead, we are also ramping up our R&D spending for the balance of the year to ensure that we continue to introduce the next generation of advanced products and solutions to our customers."
"The quarter was truly outstanding in every sense of the word, as evidenced by our operating results which were impressive based on any measure. We view our performance in recent years as a tangible validation of our strategic vision."
"Fiscal 2005 is expected to be another record year for us on the top and bottom lines: the third in a row. In fact, our sales for the first six months of fiscal 2005 exceeded our sales for all of fiscal 2002. The vast majority of the sales growth was organic; further validating that we enjoy solid leadership positions in high growth markets. We look forward to the balance of fiscal 2005 and beyond with continued enthusiasm."
In commenting on the Company's stock split, Mr. Kornberg noted, "We believe the stock split will enhance the liquidity in the market for our shares and make our shares more accessible to individual and institutional investors." I wonder if Kornberg has any problems with roughage?
CMTL is a bet that their most recent trend will continue. I guess I could be wrong. Me? Wrong?? Baa haa haa haaaaa!! I am HUGE!!
$$$MR. MARKET$$$
__________________
How can one man be so HUGE? What other adjective can be left to describe someone who now has 75 consecutive profitable trades of 15% or better. How can this be? How can this continue in such unfettered fashion?
Today I sold CMTL at 40.50. That’s a 20% gain over my (split adjusted) purchase price of 33.70. During the same period, the S&P 500 was only up 3.5%. So who is superior? The facts are plain as day. $$$MR. MARKET$$$ is the greatest stockpicker on the planet. Can you do that? You? You?? YOU??? I can’t LOSE! CANT LOSE!!! Drinking machine!!
To the market I say:” You sees? You sees what you get when you mess with $$$MR. MARKET$$$?”
The most excellent news is that there will be another $$$MR. MARKET$$$ winner forthcoming shortly. But you will not get one unless you tell me how great $$$MR. MARKET$$$ really is.
So let’s hear it!
I am HUGE! Bring me your finest meats and cheeses.
$$$MR. MARKET$$$
================================================== =============
03-29-2005, 09:59 AM
mrmarket
Administrator Join Date: Sep 2003
Posts: 1,420
CMTL ==> The Spring Break Winner
--------------------------------------------------------------------------------
You’ve just sipped your last drip of coffee from your cup and you lean back in your chairback and insert a toothpick into your mouth. Your mind wanders as you recollect the juicy thick rib-eye steak, prefaced with broccoli cheese soup, that you had the pleasure of consuming. All of a sudden, a strange, but somehow familiar, aroma snaps you out of your blissful stupor. Then your dinner guests begin the chain of denial:
The established order is;
"Whoever smelt it dealt it"
"Whoever denied it supplied it"
“Whoever ignored it stored it”
"Whoever made the rhyme committed the crime."
Passing gas, cutting the cheese, dropping an f-bomb, ripping one— call it what you want, but farts are a part of everyday life for men and women. How shall thou deal with the foul smell and sometimes obvious sound of flatulence? This question, like many others, has no one answer.
Strategies for Concealing: If you must hide it, you have several options. In public places like grocery stores, movie theaters and shopping malls, I recommend “crop dusting.” Simply unload and move on. Whoever comes to the drop site will be blamed and surprised. The old phrase, “Whoever smelt it dealt it” just isn’t always true. Be advised that not all farts are “crop dusting” material. Some will leave residual scents around you—these are the dreaded “farts that follow.”
The fact that these inherently tautological statements, and tactics, seem to conflict with one another would indicate that we have not yet advanced our telecommunications skills to the point where this information can be distilled into facts we can all find useful.
That’s why we need a company like COMTECH Telecommunications(CMTL). Comtech designs, develops, produces and markets innovative products and services for advanced telecommunications solutions.
Today I bought CMTL at 50.55. I will sell it in 4 to 6 weeks at 58.37. Here’s why I like CMTL:
CMTL’s stock is up over 230% in the last 12 months. Despite this remarkable runup, its PE is only 26.7. There’s a lot more room for its price to climb.
Yes indeed…very beautiful.
Comtech has grown substantially in recent years as evidenced by net sales increasing from $30.1 million in fiscal 1998 to $119.4 million in fiscal 2002 and $223.4 million in 2004. This growth has occurred within internal operations, as well as through acquisitions. More than 275 distinct Comtech products are in service in over 100 countries. They have the leading market share of satellite earth station modems and are overall leaders in the market segments that they serve.
With a leading-edge portfolio of product offerings, a focus on our core businesses, a dedicated and talented employee base and strong financial condition, Comtech is well positioned to be a market leader in the business segments they serve. They have demonstrated a consistent track record of delivering strong financial results. Comtech also has over $160 million in deployable cash for earnings accretive acquisitions.
Comtech is broken up into 3 operating groups:
• TELECOMMUNICATIONS TRANSMISSION
• RF MICROWAVE AMPLIFIERS
• MOBILE DATA COMMUNICATION
TELECOMMUNICATIONS TRANSMISSION
The telecommunications transmission segment provides sophisticated products and systems for voice, video and data transmission in satellite, over-the-horizon microwave and wireless line-of-sight telecommunication systems. Look at our world economic infrastructure. If anyone thinks that video and data transmission aren’t going to experience phenomenal growth in the next decade, then they’ve been spending too much time sniffing fumes at the dinner table.
CMTL has the #1 market positions in three product areas within the Telecommunications Transmission segment – satellite earth station modems, forward error correction technology and over-the-horizon microwave systems. The key enabling technologies are protected by patents, as well as solid reputations for performance and quality.
CMTL’s Turbo Product Coding technique has become the standard in optimizing bandwidth utilization. The world’s appetite for bandwidth goes on unabated. The Turbo Product Code chip runs at 311 megabits per second which makes it the fastest stand alone error correction integrated circuit in the world. If you are the best at something, it means you know how to manage excellence. Comtech offers a complete line of satellite earth station products, so they have become a “one stop shop” for all users of satellite systems and network integrators.
The subsidiaries in the telecommunications transmission segment serve a diverse group of customers including Northrop Grumman, BP Amoco, Exxon, AT&T, Hughes Network Systems, Globecomm Systems and the U.S. Government.
RF MICROWAVE AMPLIFIERS
The RF Microwave Amplifiers segment is a leading independent supplier of broadband, high-power, high performance RF microwave amplifiers used in sophisticated applications, including aircraft air-to-ground satellite communications, medical oncology systems, instrumentation and a variety of defense applications.
Comtech’s amplifiers are used to amplify signals carrying voice, data and fax transmission for air to satellite to ground communications. These amplifiers can provide passengers on an airplane with e-mail, Internet access and video conferencing.
Comtech’s solid-state high-power amplifiers are extremely complex and critical to the performance of the systems that they are incorporated into. Because of their technological complexity and importance to the performance of the larger system, most companies prefer to manufacture these products in-house. As a result of Comtech’s in-house engineering and contract manufacturing capabilities, their RF Microwave Amplifiers segment has become an independent outsourcing alternative. Customers, among others, who currently outsource RF microwave amplifiers work to Comtech, include: Rockwell Collins, Raytheon, Thales, Lockheed Martin, Northrop Grumman and Siemens Medical Systems. As the economy recovers and changes, the trend towards outsourcing the contract manufacturing will continue, which will
grow CMTL’s customer base.
Here’s what one of them looks like:
I don’t know about you, but I wouldn’t put my finger in it.
MOBILE DATA COMMUNICATION
Comtech’s Mobile Data Communications Services segment provides satellite-based mobile data communication services for the government and commercial markets. They provide mobile terminal units and message communication services to the US Army and other military commands. Comtech first emerged as a leader among providers of mobile data communications systems in 1999, when Comtech was selected to provide the Army Logistics Command's Movement Tracking System (MTS).
The technology used in the MTS system provides the Army Logistics Command with a better, more cost-effective way of monitoring and maintaining two-way communications with mobile military assets around the world. It makes possible rapid, secure, real-time communications with vehicles, ships and aircraft. This two-way communication can be between headquarters, a temporary location or between vehicles using satellite, terrestrial or internet-based communication methods.
Our brave men and women protecting us overseas need the best of the best in technology and they are getting it in a big way. Uncle Sam has been camping out in Comtech’s backyard and they are deploying these services which has been generating big bucks for Comtech. Like it or not, there is no foreseeable end to this requirement.
Developed initially for the U.S. Army and also available to commercial customers, Comtech's product is dome-shaped and about the size of an old-fashioned breadbox. Logistics personnel communicate back and forth via two-way text messaging with the vehicle's crew about their location, environmental conditions and diversions from scheduled routes, and can redirect the shipment to where it's most urgently needed at the time. "The Army has needed a capability to track the location of vehicles as well as the critical supplies they transport, communicate with vehicle operators, and redirect movements based on changing battlefield requirements," said Lt. Col. James Bass, the Army's MTS product manager. "This next generation Movement Tracking System provides greater visibility of supplies and ultimately more effectively supports the war fighter at the tip of the spear."
The Army's Movement Tracking System product office has fielded about 7,000 of the previous version of the MTS product, including 4,000 in Iraq, and has plans to order another 12,000 of the RFID integrated units, according to Bass. Comtech, which has provided satellite-only MTS units for the military over a number of years, is the sole supplier to the U.S. Army for the Movement Tracking System. Designed for the U.S. Army and also available to commercial customers, Comtech's MT-2012 is a mobile, two-way text messaging system designed to track vehicles and communicate with their crews while on and off the road. This system is the leading satellite-based mobile data communication system employed by both the US Army warfighter and logistics commands that operates in the L-band frequency range and has near real-time messaging and location tracking of mobile assets. You want to know where the Humvee went, now it’s easy to find it.
The embedded GPS receiver provides automatic "hands free" position reports and other messages, such as location, environmental conditions and emergency information. Despite the significant increase in revenues in this segment over the past few years, this technology has only been installed in a small number of the total logistics and warfighter vehicles that the US Army would like to equip. Sounds like an enormous upside to me. Comtech is the sole provider of the US Army logistics command’s Movement Tracking System and their contract allows for the purchase of equipment and services over an 8 yr period ending in 2007.
Another new opportunity is the enhancement of a government nomenclatured line-of-sight microwave system to which Comtech has added their over the horizon microwave capability. Comtech has announced that their system is being tested and that if the US Government decides to proceed, and obtains funding for these programs, that Comtech’s revenue base could “grow dramatically”. I am certain that Comtech wouldn’t stick their neck out like that and make this kind of statement unless there was some beef already behind it.
Great products, great outlook. How does it translate into earnings for Comtech? I’m not going to sugarcoat it. CMTL is making a ton of money right now because they service our US Defense interests in the Middle East right now. As optimistic, and hopeful, as I am that there will be an end to hostilities someday, I just don’t see it happening right now. Quarterly sales in the mobile data communications segment are expected to increase dramatically for the remainder of fiscal 2005 as deliveries occur on recently received orders, as well as pending orders, from the U.S. Army.
On March 9, 2005 Comtech reported record results for the second quarter of fiscal 2005. Sales, operating profit, EBITDA, net income and diluted earnings per share shattered all previous highs. The Company also announced that its Board of Directors has approved a three-for-two stock split to be effected in the form of a stock dividend.
Quarterly sales soared past the $70 million mark for the first time in the Company's history. Net sales for the three months ended January 31, 2005 were $78.1 million compared to $56.8 million for the three months ended January 31, 2004. Strong increases in sales were experienced in all three business segments.
Net income of $10.2 million, or $0.59 per diluted share, for the three months ended January 31, 2005 was nearly double the $5.2 million, or $0.34 per diluted share, for the three months ended January 31, 2004. The diluted earnings per share amount for the second quarter of fiscal 2005 reflects $0.05 of dilution in connection with the required adoption of new accounting rules regarding the impact of contingently convertible debt on the calculation of diluted earnings per share.
The second quarter results were impacted by favorable adjustments to certain long-term contracts in our telecommunications transmission and mobile data communications segments which reflect continuing positive trends in our performance on these contracts, as well as increased funding on the Movement Tracking System contract with the U.S. Army. Net sales in CMTL’s mobile data communications segment were $29.8 million and $18.4 million for the three months ended January 31, 2005 and 2004, respectively, an increase of $11.4 million or 62.0%. The substantial increase in revenues was primarily due to increased demand and continued deployment of Comtech technology by the U.S. Army.
Net sales for the six months ended January 31, 2005 were $134.2 million compared to $113.1 million for the six months ended January 31, 2004. Net income for the six months ended January 31, 2005 was $17.3 million, or $1.02 per diluted share, versus $11.0 million, or $0.71 per diluted share, for the six months ended January 31, 2004.
Backlog as of January 31, 2005 remained strong at $159.0 million. Bookings for the three and six months ended January 31, 2005 were $74.4 million and $209.6 million, respectively.
The additional shares relating to the stock split will be issued on April 4, 2005 to stockholders of record on March 21, 2005. Don’t you just love getting in before a split?
So now what’s the $64,000 question. Everyone should know by now that what makes a stock price go is earnings earnings earnings. Where are CMTL’s earnings going? Let me tell you.
ANAL-ysts say that CMTL will earn $1.85/share for 2005. At today’s PE of 27, that projects to a stock price of $49.95, right around where I bought it. Makes sense I guess. Now let’s take a look at the quarterly earnings for 2005 so far this year. First quarter was $0.49 and 2nd quarter was $0.59/share. So that means so far this year we are already at $1.08/share. In order for CMTL to come in at $1.85/share, that means that for the remainder of 2005, they will need to earn only $0.77/share, or average $0.38/share per quarter. Someone please tell me what kind of crack these ANAL-ysts are smoking?? Whoever denied it, supplied it?
Any 6 yr old can follow this trend. I’ve already explained where the earnings are going to come from. Their backlog of $159 million in orders is equal to more than 6 months of revenue. CMTL’s 5 year sales growth is 31.4%. This compares to Motorola’s -3%, Nokia’s 13% and Qualcomm’s 7%. CMTL will easily pick up ANOTHER $1.44/share for the remainder of 2005 which means they will net $2.52/share for 2005. If you use today’s PE of 27, that will get CMTL’s stock up to $68.04 (pre-split). I’m likin it. You? You?? YOU???
This is a transformational story. It doesn’t make any sense to look at CMTL in its 1999 mode of operation. It’s a whole new world out there and CMTL is in it. I don’t think that the ANAL-ysts have caught on yet. That’s ok, I’ll take their money too. Comtech’s operating income as a percentage of sales was 14.6% in 2004 vs. 9.7% in 2003. With revenues projected to grow, much more of these sales will fall to the bottom line leading to even better earnings growth. The siginificant sales growth in 2004 was driven by strong demand for their products. Wait til they start jacking up their prices!
Their net margins of 11% are more than double what they were in 2001. Current assets have grown from $104 million to $294 million while current liabilities have only moved from $37 million to $74 million. CMTL’s balance sheet is in great shape.
Here’s what the boss, Fred Kornberg, had to say:
"We handily beat our revenue and EPS guidance and achieved strong operating results, as evidenced by record levels of net income, earnings per share and EBITDA, all while significantly increasing our R&D spending and absorbing increased operating expenses, many of which are fixed. These expenses are expected to be leveraged over a greater revenue base for the balance of the year."
"We generated more than $20 million in cash flow from operating activities during the quarter as we collected a significant amount of receivables on a large over-the-horizon microwave contract as it neared completion."
"The receipt of a $77.0 million over-the-horizon microwave contract in September, the strong bookings in our mobile data communications segment over the past few months and continued strong demand for our satellite earth station products have set a strong foundation for record results in fiscal 2005. Looking ahead, we are also ramping up our R&D spending for the balance of the year to ensure that we continue to introduce the next generation of advanced products and solutions to our customers."
"The quarter was truly outstanding in every sense of the word, as evidenced by our operating results which were impressive based on any measure. We view our performance in recent years as a tangible validation of our strategic vision."
"Fiscal 2005 is expected to be another record year for us on the top and bottom lines: the third in a row. In fact, our sales for the first six months of fiscal 2005 exceeded our sales for all of fiscal 2002. The vast majority of the sales growth was organic; further validating that we enjoy solid leadership positions in high growth markets. We look forward to the balance of fiscal 2005 and beyond with continued enthusiasm."
In commenting on the Company's stock split, Mr. Kornberg noted, "We believe the stock split will enhance the liquidity in the market for our shares and make our shares more accessible to individual and institutional investors." I wonder if Kornberg has any problems with roughage?
CMTL is a bet that their most recent trend will continue. I guess I could be wrong. Me? Wrong?? Baa haa haa haaaaa!! I am HUGE!!
$$$MR. MARKET$$$
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