Axsys Technologies: Solid Quarter, Unanswered Question

Axsys Technologies (AXYS) put in another solid, steady quarter, but the stock is now asleep as we await some sort of resolution to the company putting itself up for sale. [Mar 11: Bookkeeping: Starting Axsys Technologies as Company Puts Itself Up for Trade] [Mar 12: Axsys Technologies Confirms it has Put Itself Up for Sale]. I continue to marvel at this valuation when people are running up consumer discretionary stocks at >20x forward earnings with no visibility. Main concern is small growth in backlog but other than that, things seem ok here...

• During the first quarter of 2009, Axsys generated sales of $66.6 million, compared to $56.4 million in the first quarter of 2008. Net income was $7.0 million or $0.61 per diluted share, up from $5.1 million or $0.45 per diluted share in the first quarter of 2008.

Sales up 18% year over year
Gross margin down from 34.0% to 33.1%
Operating margin up from 14.2% to 16.4% (very nice)
Net income up 37%
Backlog up 3%

• Broad-based demand within both business segments drove sales growth in the first quarter of 2009. Gross margin was impacted by the increased overhead associated with the new Nashua facility and start up costs associated with a large infrared lens order.
• Improved leverage on the company's operating expenses resulted in higher operating margins in both business segments.
• The Surveillance Systems Group's sales increased by 17% compared to the same period of the prior year due to continued demand for a variety of camera systems, with the strongest demand in the areas of land-based perimeter security and airborne surveillance.
• The Imaging Systems Group's sales grew 19% year over year driven mainly by an increasing demand for infrared lenses and military-grade motion control products.
• "The recently proposed defense budget, as outlined by Secretary of Defense Robert Gates, confirms our view that these technologies will play an increasingly prominent role in the years to come."

Axsys Technologies, Inc. is a global leader in the design and development of high-performance surveillance cameras, imaging systems and related motion control technologies, serving the aerospace, defense, and high-performance commercial markets.

[Feb 18, 2009: Axsys Technologies Solid Quarter]

[Dec 12, 2008: Time to Buy Axsys Technologies?]

[Dec 5, 2008: An Outperfomer in Defense: Axsys Technologies]

[Dec 12, 2008: Time to Buy Axsys Technologies?]

Disclosure: Long Axsys Technologies in fund; no personal position