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Summary

  • The company beat earnings but shares have sold off since then.
  • The beat confirms our thesis that the company is a long-term play on the rebounding economy.
  • We felt an earnings beat was in the works during our initial article when we noted that Wall Street has continually underestimated the company’s earnings potential.

Manhattan Associates (NASDAQ:MANH) jumped nearly 5% on a 2Q earnings beat, but shares are still down 13% over the last month. 2Q EPS came in at $0.29 (besting $0.27 consensus) and revenues were $122.5 million (topping $115 million consensus).

Shares are still up nearly 13% since our October analysis. We're still about 14% off our $35 price target. The recent sell-off appears to be somewhat unjustified. Full year 2014 EPS is projected to come in between $1.10 to $1.12 per management, with Wall Street consensus at $1.12. That's well above the $0.99 consensus estimate for full year 2014 EPS from our October article.

As we noted in October:

As corporate spending rises, so should sales for Manhattan Associates. This comes as IT budgets are heavily tied to the broader economy...One of the most promising attributes of Manhattan is that the company has a high level of operating leverage. Its operating margin has jumped nearly 15 percentage points in just under four years. Manhattan's operating margin came in at 8.6% for 2009, but over the last twelve months it has improved to 22.2%.

Source: Update: Manhattan Associates Earnings