One of the few companies approaching its 52-week highs in this lousy market environment is Applied Signal Technology Inc. (APSG), a maker of intelligence, surveillance and reconnaissance products. On Tuesday, the company said its profit for the first quarter ended January 30 more than doubled to $3.5 million, or 27 cents per share, from $1.5 million, or 12 cents per share a year ago.
Quarterly revenue grew 6 percent to $45.4 million. Analysts surveyed by Thomson Reuters expected the company to earn 15 cents per share on $47.1 million of revenue. Shares rose nearly 7 percent for the week, a period that saw more weakness for stocks in the overall market.
While earnings were buffeted by a lower tax rate due to a change in its employee stock purchase plan, lower stock-based compensation expenses, and a gain of $500,000 related to an accounting change for some contracts, President and CEO William Van Vleet said the strong first-quarter financial performance was also driven by both a continued increase in sales and a more efficient operating structure.
He says the company continues to see good levels of demand for its core suite of SIGINT products and excellent adoption rates for its new tactical wireless product.
Mr. Van Vleet said the company is intent on capturing organic growth opportunities across several categories of existing products, and those in development, as well as lowering the company’s cost structure to reinforce its competitiveness on a broader range of products.
Indeed, new orders received during the first quarter increased by 23 percent to $33.1 million, primarily as a result of the demand for the company’s new Raider product – a 3G-capable surveillance product that is specifically designed for ground-based tactical operations, and intelligence, surveillance, and reconnaissance applications.
Given that Applied Signal’s major customers are the Department of Defense, the Intelligence Community, the Department of Homeland Security and allied governments the big question everyone wants to know is what impact will the new Administration’s budget will have on profits.
Mr. Van Vleet says the funding environment continues to be good, even as cuts in the defense budget appear to be on the horizon. He says only about 20 percent of total company revenues are derived from the Defense Department.
In addition, conservations with other customers revealed that they expect to see significant stability over the next several years, which he believes is a positive for Applied Signal. He also said there’s a need to recapitalize a good deal of older equipment and is comfortable that the company’s business base will perform well over an extended period of time.
This article was written by Jamie Dlugosch, contributor to InvestorPlace Media. For more actionable insights likes this, visit www.InvestorPlace.com.
