Eagle Test Systems takes off as Q1 profit rises
Shares of Eagle Test Systems, Inc. (Nasdaq: EGLT) were flying high today on news after the close on Tuesday that the maker of automated test equipment for the semiconductor industry reported fiscal first-quarter income above Wall Street’s projections.
The Buffalo Grove, Ill.-based company announced that net income for the three months ended Dec. 31, 2007, was $5.3 million or $0.23 per share, an increase of 36% compared with net income of $3.9 million, or $0.17 per share, a year earlier.
Revenues soared 29% to $31 million from $24 million during the first-quarter of the previous fiscal year.
“I am very pleased with our strong first quarter performance, particularly during these challenging economic times,” said Len Foxman in a statement.
Looking forward, Eagle Test Systems estimates revenues for the second fiscal quarter ending March 31 will be between $30 million and $34 million, above the $29.57 million consensus projection of three analysts polled by Thomson Financial.
“Eagle Test Systems goes through volatile revenue streams,” said Deutsche Bank analyst Peter Kim in a phone interview. “It is heavily leveraged toward its one main customer: Texas Instruments.”
According to Kim, Texas Instruments Inc. (NYSE: TXN) has recently increased its capital spending and focused more on testing. Consequently, the revenue Eagle Test Systems got from the Dallas-based chipmaker increased 117% during the fiscal first-quarter and comprised 46% of all revenues during that period.
The analyst explained that Eagle Test Systems has been making an effort to diversify its customer base.
“They have been making inroads in China, which is in the early stages of evolving as a testing house,” Kim said. Additionally, the maker of automated test equipment is trying to get a foothold in Europe by providing products for automotive chip testing to European car manufacturers.
Looking ahead, the company, which was founded in 1976 and has six offices outside the United States, expects second-quarter profit to be between $0.17 per share and $0.24 per share. That range is on both sides of Wall Street’s projected earnings of $0.22 per share.
“They tend to guide conservatively,” said Kim, who reiterated a “buy” rating and has a target price of $16 a share. “Last quarter, both [revenue and earnings] were well short of what they achieved.”
At close, shares of Eagle Test Systems (EGLT) rose $1.48, or 14%, to $11.94. The stock soared to its 52-week high of $18.14 on April 25, 2007, while the 52-week low of $9.31 was set on Jan. 22.
