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Stimulus Dollars Begin to Flow, Energizing Contract Growth for Engineering Firm WPCS

|Includes:WPCS International Incorporated (WPCS)
WPCS International Incorporated (NasdaqGM: WPCS), a provider of wireless communication, specialty construction and electrical power solutions for customers in the public service, healthcare, energy and corporate enterprise sectors, has seen its stock beaten down of late by a harried contracting environment and fiscal year results that were off prior year levels (revenues for FY10, which ended April 30, 2010, were down approximately 1.2% to $105.8M while net income was down 48.9% to $0.9M).  Much of this revenue reduction can be traced to the tight purse strings of local and state governments as tax revenues fell because of the Great Recession.

However, on Monday, WPCS International released news of $12 million in new contracts. CEO Andrew Hidalgo stated that his company is “receiving many new projects from state and local municipalities, which indicates for us an increased level of fiscal stimulus spending.”

As Mr. Hidalgo indicated, stimulus spending of taxpayer dollars is now starting to flow, which has jumpstarted the flow of technical contracts to the company. According to Recovery.gov, about $132 billion or 48% of the $275 billion in contracts, grants and loans for infrastructure upgrades included in the 2008 Congressional stimulus package has been spent.  Based on the total labor hours for a quarter that recipients report for each funded project, the U.S. government has calculated that 749,142 jobs have been funded by the massive $787 billion bill.

Since WPCS engineers communications infrastructure, much of their revenue results from government expenditure. Newly contracted bids for government projects include assignments for multiple police and fire departments, townships and schools across America, and even the Commonwealth of Pennsylvania.

WPCS had already announced approximately $50 million in new contracts through June 2010, versus a mere $50 million contracted for the entire year of 2009. The 2010 contracts have also had especially high margins, which portend greater profitability for FY11.   

The Company is well-positioned to receive more contracts, and if wins continue to flow in, WPCS could present a buying opportunity as the stock may begin to reverse its three-month downward trend.

Disclosure: The subject security is a client of RedChip Companies, Inc. RedChip Companies, Inc., employees and affiliates may have positions and affect transactions in the securities or options of the issuers mentioned herein. For full financial disclosures for all RedChip clients, please visit http://www.redchip.com/disclosures.asp?src=rcv.



Disclosure: WPCS is a client of RedChip.
Stocks: WPCS