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Technology Stocks : Earnings: Small Cap Tech/ Software
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To: SusieQ1065 who wrote (132)2/13/2002 5:05:28 PM
From: SusieQ1065  Read Replies (1) of 238
 
15:12 ET

Concord EFS (CEFT) 29.60 +2.12: This is a company that provides integrated electronic transaction services for credit card, debit card and electronic benefits transfer ('EBT') card transactions. The shares are solidly higher for the second consecutive session on better than 2x average daily volume. The catalyst is the company's fourth quarter earnings report in which Concord matched the consensus earning estimate of $0.17 per share. At the same time, revenues rose 18% year-over-year to $473.6 million which was light of the consensus expectation for revenues of $482.5 million. Despite its shortfall on the topline, Concord has been the beneficiary of two analyst upgrades released earlier today. Specifically, Jefferies has increased its rating to Buy from Hold and increased its target price to $33. In a similar move, Legg Mason has raised Concord to Strong Buy from Buy, taking its price target up to $35. In terms of the industry outlook, it's difficult to contend with the analyst optimism. Financial transactions are increasingly gravitating towards electronic exchange which makes for a promising outlook for companies targeting this market. Concord currently owns 70% of the supermarket industry which means if you pay for your groceries by debit card there is a good chance you are using the company's technology. Concord also serves the oil and gas market where 'pay at the pump' continues to gain acceptance. Going forward, the company is targeting any business that has a high volume of cash and checks. Yet from the standpoint of its fourth quarter results, there is one item worth noting. Revenue growth came in at 18% which was under analyst expectations in the range of 20-21%. This means Concord's in line earnings were the result of improved cost controls as its cost of operations rose only 15% versus its 20-22% run rate in the first half of 2001. In terms of the forward outlook, management strongly defended its prospects stating it expects revenues to accelerate in fiscal 2002. All in all, Concord continues to look solid fundamentally and valuation is not an issue for the longer-term investor. Yet the slower revenue growth could be an issue in the near-term and may keep a lid on the shares until tangible evidence of acceleration becomes apparent. -- Mike Ashbaugh, Briefing.com
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