After a second read, there is a one time gain too.
The one time sale of a portion of the Plastics and Metal Stamping operation to GE caused a one time gain of $626k. This offsets a lot of the unusual tax rate, and so I estimate that the ongoing operations earned about 15 cents a share, using the normal tax rate. The analyst estimate for EPS this Q was 16 cents a share, so on an earnings basis, looks like they came in right about expected, once we exclude unusual gains/taxes. I wonder if the currency gain tax situation will be repeated in future quarters. Given the weakness in the peso, I was surprised that they did as badly this Q as they reported. In the past, the company has said a large drop in the peso would help earnings considerably, at least until the yearly wage adjustment in December. Given the recent weakness in the peso, looks like Elamex workers will get another big raise this December, so the 1st Q of 99 will be impacted with substantially increased labor costs.
Of course the big problem is the lack of top line growth. It will be interesting to hear the company's comments tomorrow. I found a few things in the call that seemed to signal better things in the future:
- the fact that they have expanded their SMT capacity by 50%
- the deal with GE
This company has certainly not delivered the top line growth I hoped for when I first bought stock. And in the last year, they have a turnover in customers much higher than in prior years. I have better hopes for the future based on the GE deal.
Paul |
