Earnings Preview: Electro-Optical Engineering

Oct.15.08 | About: EXFO, Inc. (EXFO)

Electro-Optical Engineering (NASDAQ:EXFO) is expected to report Q4 earnings after market close Wednesday Oct. 15, with a conference call scheduled for 5:00 pm ET.

Guidance

The consensus estimate is 6c for EPS and $51.98M for revenue, according to First Call.

Analyst Views

Management had lowered guidance on the last earnings call for Q4 EPS of break-even to 4c and revenue of $49M to $53M. RBC Dain expects a solid Q4, but recently lowered their long-term forecasts for EXFO on global economic conditions, outlooks for EXFO's end-markets, and less capital availability for EXFO's customers for network builds. EXFO's commentary last quarter indicated some signs of this, with discussions of potential order delays with Verizon (NYSE:VZ), and the macro environment has deteriorated since then, according to RBC Dain. Partially offsetting this, RBC Dain expects that margins will be positively impacted by recent decline in Canadian versus the US dollar.

RBC Dain expects EXFO to provide its annual outlook for F2009 with the Q4 report. The firm's recently revised forecast reflects 14% YoY sales growth to $210.9M, aided by acquisitions, generating EPS of 31c (+92% YoY). Consensus calls for 31c on $224M. EXFO's cash stands at $96.5M or $1.39 per share, over half the current share price. With excess cash, RBC Dain believes EXFO is in a strong position to pursue targeted acquisitions at more attractive prices than we have seen in several years.

Key issues for the conference call: Forward guidance; bookings and gross margin performance details/guidance; and perhaps commentary on what the company plans to do with its cash on hand.