Strengthening earnings capacity was apparent in the second quarter 2006 results of LoJack (NASDAQ:LOJN), the premier tracker and retriever of stolen vehicles. Sales and earnings per share were $56.7 million and $0.29, respectively.
This compares favorably to our forecast of $52.3 million in sales and $0.24 EPS and the consensus EPS estimate of $0.28. Revenue was driven by higher unit sales of LoJack System in both domestic and international markets. Domestic and international unit sales increased 22% and 34%, respectively, over the prior year quarter. Gross profit margins set a record in the quarter at 54.6%, substantially higher than guided by management at the beginning of the quarter. Higher royalty payments as a portion of the sales mix and lower unit costs helped drive profits.
LoJack management struck a far more optimistic tone in the 2Q06 earnings conference call compared to their presentation following 1Q06 results. However, sales and earnings guidance was unchanged: top-line growth in a range of 12% to 15% and earnings growth in a range of 8% to 10% over last year. We continue to model the upper-end of management's guidance. Our revised estimates are sales of about 18.4 million (from $214.0 million) and net income of $20.5 million (from $17.5 million) or $0.16 per share (from $0.90).
We continue to rate LOJN a buy and reiterate our price target of $26.50. In our view, the quarter demonstrates the nimble management skills of Joe Abely and his team. Although we had some reservations before 2Q results were announced, overall we believe that the LoJack operation is strengthening.
LOJN 1-yr chart: