Lehman Brothers: Modest Change to 2006 Estimates for Sierra Wireless Despite Strong Q4 (SWIR)

Sierra Wireless (SWIR) preannounced significant revenue upside to 4Q05. Lehman Brothers' Jeff Kvaal and Tim Luke raised 2006 estimates for SWIR only modestly in response, as summarized in a note to clients:

Sierra now expects sales of $37M, up from its prior $32M expectation. We believe strength at Sprint, with Cingular for HSDPA, and in OEM fueled the upside. Management did not offer a revised EPS outlook. Our 4Q estimate rises to ($0.06) vs. Sierra's prior ($0.12) guidance on higher sales and stable 33% margins.
We had previously modeled March sales to be up sequentially. Given the likely entry of UTStarcom (UTSI), we now expect a 5% sequential decline. Our 2006 estimates thus rise only modestly to $160M/($0.12) from $158M/($0.14). We do believe, however, that this broad based market strength highlights Sierra's recovery. We look for more insight into the pace of OEM revenue growth in 2006. Our price target remains 1.5x 2006 sales or $13.

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