Shares of Geospace Technologies Corp. (GEOS) moved past its 52-week high following its December 11 quarterly report, which included year-over-year gains in earnings and revenue. With order and revenue growth expected throughout 2013, this Zacks #1 Rank (Strong Buy) scientific and technical instruments manufacturer appears set to fly.
Q4 EPS & Revs Grow Y/Y
Geospace Technologies reported fourth quarter earnings per share (EPS) of 33 cents, which missed the Zacks Consensus Estimate but advanced 17.9% from the year-ago quarter.
Net sales increased 12.6% from last year to $36.9 million. A delay in order delivery to Statoil ASA (STO) (which is now scheduled in the first/second quarter of 2013) resulted in the lower-than-expected revenue.
Upbeat Revenue Guidance
Management expects a solid rebound in its revenues in fiscal 2013, aided by order pull-ins and additional revenue recognitions from contracts signed earlier this year. The company also believes that a new $160.0 million contract from Statoil will boost its revenue growth in the coming 2-3 years. Geospace Technologies estimates that roughly 45% of Statoil’s contract will be recognized in 2013, 40% in 2014 and the remaining 15% in 2015.
The company also expects that the revenue boost will neutralize its continuous investments in materials and equipment, and support margin expansion as well as increased profitability.
Earnings Estimate Revision
In the last 30 days, the Zacks Consensus Estimate for fiscal 2013 increased 6.2% to $5.86 per share, as 3 of 8 estimates were revised upward.
Premium Valuation is Justified
Currently, Geospace Technologies is trading at a P/B of 5.2 and a P/S of 5.8, both of which are at premiums to the peer group averages of 1.5 and 0.7, respectively. Its ROE of 17.4% is higher than the peer group’s 7.9%. Considering the growth potential and high value contract wins, the premium valuation seems justified.
Chart
Shares have jumped 109.54% in the past 6 months, compared to an 8.9% increase for the S&P 500. Its strong revenue growth potential has sparked the stock price increase. It is currently trading well above its 50-day and 200-day moving averages of $73.43 and $57.04, respectively.
OYO Geospace Corporation was renamed as Geospace Technologies Corporation in 1980. The company primarily deals in manufacturing and selling of instruments and equipment used by the oil and gas industry. The company helps its customers in the acquisition and processing of seismic data as well as in reservoir characterization and monitoring activities. The company currently has 1,164 employees and a market capitalization of $1.12 billion.
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