RATL ($11-$14) P/E 108...misses by 2 Cents... says macro-economic environment and terrorist attacks presented company with significant challenges during the qtr....Lowers outlook for 2002.
Tuesday October 9, 7:16 pm Eastern Time
Rational Software's Q2 earns fall, lowers 2002 outlook
(UPDATE: Recasts, adds analyst comment, outlook, after-hours stock activity, details throughout, byline, previous CUPERTINO)
By Lisa Baertlein
PALO ALTO, Calif.,, Oct 9 (Reuters) - Infrastructure software provider Rational Software Corp. (NasdaqNM:RATL - news) on Tuesday reported lower fiscal second-quarter earnings, excluding one-time items, that landed at the low end of analysts' expectations as the bearish economy and deadly Sept. 11 jetliner attacks hampered business.
During its conference call with analysts, Rational also issued fiscal 2002 guidance that is lower than Wall Street's current consensus forecasts but assumes sequential revenue growth in the third and fourth quarters -- usually the company's strongest for sales.
Rational shares, which finished Tuesday's regular Nasdaq trading session 2 cents lower at $11.43, fell below $10 in after-hours activity on Instinet before rebounding to closing levels.
The stock now trades more than 80 percent off its year-high of $66.25.
``The guidance is putting a positive spin on the second-half of their fiscal year,'' said J.P. Morgan analyst Chris Galvin, who noted that Rational and many other software makers have strongest sales in their third and fourth quarters.
PRO FORMA EARNINGS SHRINK, NET LOSS GROWS
The Cupertino, California-based vendor of software that helps users build custom programs, reported pro forma income that fell 73 percent from year-ago levels to $9.5 million, or 5 cents per diluted share.
Including one-time charges related to acquisitions, restructuring and other activities, Rational's net loss grew to $21.6 million, or 11 cents per diluted share, versus a net loss of $19.7 million, or 10 cents per diluted share, last year.
Total revenue came in at $163.7 million, down about 13 percent from last year's second-quarter revenue of $187.5 million.
``During the second quarter, the macro-economic environment and the Sept. 11 attacks on the United States presented us with a serious challenge,'' Paul Levy, chairman and co-founder of Rational Software, said.
Analysts, who have been trimming estimates on the infrastructure software sector, had forecast that Rational's results from its second quarter ended Sept. 30 would fall in the range of nil to 9 cents a share, according to Thomson Financial/First Call. The company missed by a penny those analysts' consensus estimate for earnings of 6 cents per share.
J.P. Morgan's Galvin twice lowered his second-quarter forecast for Rational, taking expectations from revenue of $190 million and pro forma earnings of 10 cents per share to earnings of 7 cents on revenue of $175 million.
``The quarter wasn't strong. That's not too surprising considering the circumstances,'' Galvin said.
On the other hand, Rational's pro forma earnings came in a nickel better than Goldman Sachs analyst Tom Berquist had forecast.
``They made the numbers that I had before the Sept. 11 tragedy,'' Berquist said. ``The question is, 'Is their business sustainable over the next two or three quarters'.''
The company -- which is not assuming that the bearish technology economy will soon recover -- forecast fiscal 2002 pro forma earnings of 25 cents to 30 cents a share on revenue of $675 million to $700 million.
Analysts polled by Thomson Financial/First Call currently expect the company, on average, to earn 36 cents a share on total revenue of $793.6 million. |
