Learning through earnings

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“There are two kinds of investors, be they large or small: those who don’t know where the market is headed, and those who don’t know that they don’t know. Then again, there is a third type of investor – the investment professional, who indeed knows that he or she doesn’t know, but whose livelihood depends upon appearing to know.”
— William Bernstein

For investors, the quarterly earnings reports for the third quarter of the calendar year are always exciting, having the potential to boost or sink an equity — and determining the volume of gifts to be found under the tree in the coming holiday season.

This quarter is not exception, and here is how it may play out for some of our favorite equities:

  • UNTK — Unitek Global Services. Earnings release date unknown.

    The key issue for investors is whether the year-over-year improvements that we saw for the first six months of the year (a staggering 26.2% increase in revenues and increase in adjusted EBITDA of 40.5% — read more about this here) will be matched or bettered for the nine month period.

    Unless there is a material difference between the six months and nine months increases, it is probable that the per share price of UNTK will sky-rocket.

  • MTSL — MER Telemanagement Solutions. Earnings release date estimated to be November 14th, 2013, i.e. the second Thursday of the month.

    As witnessed by three recent explosive growth spurts in the per share price, MTSL is clearly on a lot of momentum traders screens and, so, if MER Telemanagement Systems can show either an increase in revenue and/or earnings (almost any increase will do) or can articulate a clear cost savings plan, it is possible that the per share price of MTSL will hit a 52 weeks high.

    MER Telemanagement Solutions has had a tendency to make a mess of its earnings releases, so unless the company’s public relations department’s performance improves markedly, a earnings and/or revenues increase or the articulation of a costs savings plan may not be sufficient to raise the per share price. Read more about MER Telemanagement Solutions earnings release difficulties here.

  • CKSW — ClickSoftware Technologies. Earnings date announced to be October 28th, 2013.

    ClickSoftware Technologies continues its investment in sales and marketing in preparation for what is generally thought to be an acquisition by a larger software company, such as SAP or Oracle, and has already pre-announced its earnings for the third quarter of fiscal year 2013.

    The pre-announcement and some other issues related to corporate governance (read more about this here) resulted in a marked decline of the per share price of the company’s equity. As usual, however, the correction went (far) too far, and over the last weeks the share price of CKSW has shown robust growth.

    The only two issues for the upcoming earnings release are whether or not the company’s management team can convey to the market a believable date, Zulu Hour, on which the investments will bear fruit and whether or not the company’s pipeline is showing strong growth and is supportive of this Zulu Hour. If the turn-around date is reasonable and believable and the pipeline supports the date, it is probable that CKSW will regain all of its lost ground, yielding significant per share price growth over a very short period.

  • MIND CTI — MNDO. Earnings date announced to be November 5th, 2013.

    Mind CTI is on the acquisition path, searching for a company to buy so as to help it break out of the $20 million revenue band (read more about this here.)

    Investors will be watching for two inter-connected issues. First, there will be a focus on net income, with the expectation that third quarter earnings for fiscal year 2013 will dictate the disposition of the annual dividend (Mind CTI has what is perhaps the strongest dividend track-record of any technology stocks in the market today, and, accordingly, its investor base is extremely stable — read more about Mind CTI’s dividend here.) Second, there will be a focus on the progress made on the acquisition and the obvious question of whether or not Mind CTI, which has strong cash reserves and strong free cash flow, can achieve a meaningful acquisition while maintaining its dividend track-record.) Currently, however, the consensus appears to be that almost regardless of the quarterly results, the per share price of MNDO will begin an ascent after or around the day of the earnings release with the only question being how radical this ascent will be.

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