Comtech (CMTL) to Report Q1 Earnings: What’s in the Cards?

Zacks

Comtech Telecommunications Corp. CMTL is scheduled to report first-quarter fiscal 2020 results (ended Oct 31, 2019) on Dec 4, after the closing bell.

In the last reported quarter, the company delivered a positive earnings surprise of 150%. Markedly, Comtech topped the Zacks Consensus Estimate for earnings in each of the trailing four quarters, the average surprise being 239.2%.

Factors at Play

The company has been providing market-leading products for messaging, location and deployable wireless communications. It is likely to have benefited from healthy business momentum including backlog, arising from significant exposure to large growing end markets, characterized by emerging technology trends for communications. Furthermore, the acquisition of Solacom and the GD NG-911 business has improved its ability to deliver advanced products and services to public safety agencies worldwide.

During fiscal first quarter, Comtech’s Mission-Critical Technologies group, which is part of its Government Solutions segment, secured a contract with $98.6 million ceiling. The deal underpins U.S. Army’s trust in the company to support warfighters. Comtech’s Mission-Critical Technologies group is known to be a leading provider of highly-mobile C4ISR (Command, Control, Communications, Computer, Intelligence, Surveillance, and Reconnaissance) solutions.

Management expects GAAP operating income in the first quarter of fiscal 2020 to be lower than the $7.3 million it recorded in the year-earlier quarter. This is primarily due to incremental amortization of intangible assets associated with the company’s acquisitions in fiscal 2019. Moreover, in order to take advantage of additional growth opportunities and meet its strategic objectives, Comtech’s GAAP operating income in the fiscal first quarter is expected to reflect about $1.5 million of acquisition plan expenses for companies whose offerings are complementary to its business.

For the to-be-reported quarter, the Zacks Consensus Estimate for net sales stands at $168 million. It registered revenues of $161 million in the prior-year quarter. Adjusted earnings per share are pegged at 14 cents, indicating a decline from 22 cents reported a year ago.

What Our Model Says

Our proven model does not conclusively predict an earnings beat for Comtech this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here as you’ll see below:

Earnings ESP: Comtech’s Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is 0.00% as both are pegged at 14 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Comtech Telecommunications Corp. Price and EPS Surprise

Zacks Rank: Comtech currently carries a Zacks Rank #3.

Stocks to Consider

Here are some companies that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this time around:

Costco Wholesale Corporation COST is slated to release quarterly results on Dec 12. It has an Earnings ESP of +1.01% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Big Lots, Inc. BIG is scheduled to release results on Dec 6. The company has an Earnings ESP of +3.85% and carries a Zacks Rank #3.

General Mills, Inc. GIS has an Earnings ESP of +1.58% and carries a Zacks Rank of 3. The company is set to report results on Dec 18.

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