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While Congress and the President try and get their acts together – Clearfield (NASDAQ:CLFD) posted a stellar Q3 earnings report Thursday morning. Revenue jumped 49% year over year and increased 42% quarter over quarter. EPS was $.11 per basic share compared with $.05 in Q3 2010, and $.04 per basic share for Q2 2011. One of the real standout items was gross margin, which climbed to 42.7% vs. 36.7% in Q3 2010 as the company continues to exhibit significant operating efficiencies. Quarterly backlog continued its climb, growing 10% sequentially and more than 117% vs. last year.

CEO Cheryl Beranek commented that while stimulus programs “are an important part of our strategic plans, the business generated under the program remains a minority of our revenue.”

As mentioned in my previous article, Clearfield is taking advantage of the business ramp that was held back in 2009 and 2010 caused by the poor economy and uncertainty over the ARRA broadband stimulus program. Much of Clearfield's growth the last several quarters is from non stimulus customers who are undertaking projects without stimulus dollars. As stimulus projects start to accelerate through the rest of 2011 and 2012, it will likely mean incremental revenue, possibly substantial incremental revenue, for Clearfield.

While Clearfield still does not host investor/analyst quarterly calls, the PR machine lately seems to be stepping up a bit in announcing project wins/implementations, including stimulus projects. Two of these stimulus wins were announced in the last week, one at Home Telephone of Kansas for a $2mm FTTH (fiber to the home) project and one at Venture Communications in South Dakota for a $7mm FTTH project. I expect Clearfield to be involved in dozens of these ARRA projects as we go through 2012. The recent PR activity may be signaling the company is feeling more confident about its financial footing and will be comfortable announcing more of these stimulus wins and engaging Wall Street as time goes on. Clearfield does continue its grass roots marketing campaign by employing two demonstration trailers that criss cross the country visiting its customers. The exploits can be followed on Facebook. That type of close relationship building coupled with a willingness to customize products and offer short, guaranteed delivery times are several factors I feel are the keys to the company winning over the Tier II & III providers.

As Cheryl Beranek stated on Thursday in the Q3 earnings PR, Clearfield is building strong relationships with the engineering firms and distributors/resellers that make FTTH projects happen. I take this to be a sign that Clearfield will benefit significantly from the Broadband Stimulus program as these firms are charged with vendor and equipment selection in many of these projects. Much of Clearfield's growth the last several quarters is from non stimulus customers who are undertaking projects without stimulus dollars. As stimulus projects start to accelerate through the rest of 2011 and 2012 – it will likely mean incremental revenue, possibly substantial incremental revenue, for Clearfield.

With Clearfield’s growth pattern now becoming more consistent, 2012 continues to look like a banner year for significant gains in revenue as well as margin expansion. The fiscal year ends September 30, and I foresee earnings for YR 2012 hitting $0.65 or higher. One can debate what P/E should be assigned a growth mover across all metrics like Clearfield but it is clear investors have started to take notice.

Disclosure: I am longCLFD

Source: Clearfield Posts Strong Earnings Despite the Macro Madness