Ooops missed --->PDYN +100% ($1.47-$345) soars after Q3 report
siliconinvestor.com
Despite 80 percent jump, one analyst voices concern
By Barbara C. Costanza, CBS.MarketWatch.com
Last Update: 11:03 AM ET Oct. 17, 2001
LARGO, Fla. (CBS.MW) -- Investors scampered to buy shares of Paradyne Networks, sending shares up nearly 80 percent Wednesday morning, as a result of the company posting third-quarter revenue that came in better than the company's expectations and significantly higher earnings compared with analysts' estimates. But one isn't screaming for investors to buy the stock just yet.
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The digital subscriber line and service level management equipment provider (PDYN: news, chart, profile) reported net income for the third quarter of 2001, which includes one-time items, of $1.5 million, or 5 cents a share. That's better than the loss of $18.1 million, or 55 cents a share, in its second quarter of 2001. Paradyne's pro forma earnings for the third quarter of 2001 totaled $1.6 million, or 5 cents a share, while analysts were looking for a loss of 13 cents a share, according to First Call.
Revenue totaled $34.2 million, up from the company's previously announced target of about $24 million to $28 million and 21 percent higher than the prior quarter. Broadband revenue continued to represent the major portion of the company's total revenue at 75 percent, or $25.6 million. Narrowband revenue totaled $7.5 million, while service and royalties accounted for the remaining $1.1 million.
Despite the company's revenue outpacing estimates, gross margins in line with his estimates and the company achieving positive earnings on a pro forma basis, Joseph Bellace analyst for Jefferies & Companies isn't screaming for investors to buy the stock.
Bellace's concern is based in the company's current contract with Broadband Technologies, which is valued at about $43 million to $46 million. Management told investors that it has already received $6.6 million from the contract, with $17 million coming in the December quarter and $26 million coming in the March quarter.
"At the present time, we do not anticipate the company will be awarded a major contract with revenues in 2002 to replace the BB Technologies contract," said Bellace. This has forced the analysts to maintain his "hold" position on the stock.
Robertson Stephens analyst Paul Johnson doesn't have a rating on Paradyne but did up his fiscal 2001 and 2002 estimates to reflect Broadband Technologies' contract with the company.
Paradyne's cash position improved for the second consecutive quarter, rising from $23 million at the end of the second quarter of 2001 to $27.2 million at the end of the third quarter of 2001.
The report did, however, prompt Dain Rauscher to up its opinion of the stock to "buy."
Shares were last trading up $1.52 to $3.64.
Barbara C. Costanza is earnings editor of CBS |
