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In-line Fourth Quarter

Estimates have been steady for MICROS Systems, Inc. (MCRS) after it reported for the second quarter of fiscal 2010, which were in line with expectations.

MICROS designs, manufactures, markets, and services enterprise information solutions for the hospitality and specialty retail industries Revenues were down 4.6% from a year ago but were almost flat sequentially.

Net income came in at $26.1 million or 32 cents per share, in line with expectations. Excluding stock-based compensation, net income came in at $29.0 million or 36 cents.

We have discussed the quarterly results at length here.

Agreement In Estimate Revisions

One out of six analysts covering the stock has upped estimate for fiscal 2010 over the past week. There were no revisions in the opposite direction. Estimates for fiscal 2011 have not shown any movement.

For the third quarter (ending in March), one out of six analysts covering the stock has increased projection for fiscal 2010 over the past week. There were no revisions in the opposite direction.

Magnitude – Insignificant Movement

On the last call, management reiterated its guidance for 2010 and expects business conditions to improve. Revenue is projected to reach $910 million. Earnings per share are projected at around $1.40. The current Zacks Consensus Estimate for 2010 is $1.33 with a downside potential of 1.5%.

MICROS has consistently met or exceeded its guidance. In terms of surprises, earnings were in line with the Zacks Consensus Estimate and fourth-quarter results beat the consensus by 14.29%. On an average, earnings have exceeded the Zacks Consensus Estimate by 15.84%.

For the third quarter, the current Zacks Consensus Estimate is 32 cents, up a penny over the past week, with a downward potential of 3.13%.

Neutral on MICROS

Most customers are either in the hospitality or specialty retail industry. Consumer spending is not expected to improve significantly unless job creation accelerates.

Nevertheless, with the economy showing signs of recovery, business should pick up for MICROS. A number of positive catalysts could lead to improved business fundamentals over the next nine to twelve months, including new hotel and casino wins, strong sales growth, margin improvement, and a positive perception of the investment community.

However, we would like to be on the sideline till we get more clarity on the recovery of the business. Our long-term recommendation for MICROS is Neutral.

Disclosure: No positions

Source: Micros Systems: Waiting on the Sidelines for Consumer Spending to Recover