Update: Team Earnings

Aug.18.14 | About: Team, Inc. (TISI)

Summary

The company beat consensus on the bottom line but missed on the top line.

We still have a long-term bullish thesis on the company as it works through interim issues.

We expected the company to revise full year 2015 EPS downward, but note that the company is seeing margin improvement.

Team (NYSE:TISI) posted fiscal 4Q earnings of $0.63 a share (topping $0.59 consensus), but its revenues marginally missed expectations. Shares are flat since pre-announcing earnings at the end of June, this comes despite the fact that its stock was down nearly 8% on the day it pre-announced.

During the June pre-announcement, Team noted that it was expecting to report $0.60 in EPS, below previous guidance of $0.65 to $0.80. The rest of Team's results were in-line with the June pre-announcement. The big reason for the downward revision was the difficult weather, as the company noted.

Shares are up 15% since we first covered the stock back in September. At the time, we slapped a $47 a share price target on the company -- still suggesting 18% upside from here. As we noted back then:

Margins are really where we're seeing the strain. Revenue has been on the up-and-up over the past decade, but gross margins are down near decade lows, around 29%. The real issue has been an increase in technician wages that the company has not been able to pass on to its customers. Much of the pricing is already locked in for the next year or so via master service agreements, but as these roll off we expect pricing to improve.

But gross margin improved to 31.4% for 4Q, a 50 basis point increase from the prior year. EPS was up 16% y/y for the quarter and EBITDA was up 7%.

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