WEB NEWS Research
TNL update:
On October 5, 2010 , we began tracking PULS, formerly TNL.
Unfortunately, the 2010 third quarter press release on November 8, 2010 included some dampening commentary on near-term business prospects as well as our enthusiasm:
Fourth Quarter Outlook
“We have factored a number of elements into our outlook for the fourth quarter,” said Moyer. “First, we typically experience lower sales volume sequentially due to normal seasonality in the consumer and automotive markets and the holiday seasons worldwide. Second, our fourth quarter of 2010 contains the customary 13 weeks compared with 14 weeks in the third quarter. Third, our capacity expansion in the second and third quarters allowed us to take significant market share in our Network— and to a lesser extent—our Power group. With capacity throughout the industry currently at or above demand levels, our revenue will soften in the near term. Fourth, order rates in the enterprise communication and Internet infrastructure markets have slowed from the robust levels in the second and third quarters of 2010, as customer inventories have increased in recent months.
“For the fourth quarter, we anticipate Network and Power will deliver year-over-year sales growth, albeit at lower rates than in the very robust second and third quarters. Our Wireless group will continue to negatively impact our consolidated year-over-year performance as the supply-chain strategy change of one of our OEM customers did not begin to impact our results until early in 2010. We expect fourth quarter net sales to range from $90 to $95 million and non-GAAP operating profit to approximate break even.
“While our sales outlook reflects normal cyclicality in certain markets we serve, our operating profit outlook—when compared with our third quarter actual results— highlights the strong underlying leverage in our business model. Our operating profit is affected dramatically by different revenue levels that are below, at or above $400 million on an annualized basis. Our strategic actions to simplify the business, rationalize our footprint and reduce our cost structure throughout the company—and particularly in Wireless—will lower our breakeven point and provide additional profit opportunities.
“Due to the near-term outlook, we are taking a series of actions to manage costs prudently. We will eliminate capacity and certain direct labor, reduce indirect labor and overtime and combine certain management positions in our operations. Further, we will reduce headcount in our antenna operations, hold the addition of certain new positions and extend holiday shutdowns in most geographies.
Research
The GeoTeam ® has begun tracking Technitrol @ $4.52 due to recent restructuring moves, bullish commentary and positive analyst EPS estimates:
Technitrol has entered into a definitive agreement to sell the remaining operations of its Electrical Contact Products Group (AMI Doduco) to Tinicum Capital Partners II, L.P., JP Asia Capital Partners and affiliates (Tinicum). The sale price was approximately EUR 33.0 million in cash, subject to normal working capital and other financial adjustments. The parties expect the transaction to close in September of 2010. Following the transaction, Technitrol will focus solely on its Electronic Components Group (Pulse), which produces a variety of components and modules used in network infrastructure and customer premises equipment; wireless handsets and other terminal devices; and power management, military / aerospace and automotive applications
“With the divestiture of AMI Doduco, Technitrol is better positioned to take full advantage of high-growth opportunities in network and wireless communications,” said Drew A. Moyer, interim chief executive officer. “The sale of AMI Doduco is perfectly aligned with our overall growth strategy and allows us to focus solely on growing our core electronics business.”
On a GAAP basis TNL is losing money , but management has indicated that profitable growth may be around the quarter. Als, non-GAAP EPS was positive for the second quarter.
Revenues for the 2010 second quarter were $116.5 million, compared with $92.9 million in the prior quarter and $92.1 million in the second quarter of 2009. U.S. GAAP d iluted loss per share from continuing operations was ($0.07). Excluding the after-tax impact of special items , non-GAAP earnings per share were $0.05, compared with losses of ($0.24) in the first quarter and ($0.04) in the second quarter of 2009.
"This quarter marks a new beginning for Technitrol,” said Moyer. “The company’s strong financial performance in the second quarter, along with the outlook for the third quarter, is a considerable improvement and reflects the successes we have had in capturing strong growth opportunities in our network and power markets. As we move forward, Technitrol will focus on completing the sale of AMI Doduco, simplifying the business and rationalizing our product offerings, investing in and expanding the antenna business, and positioning the company to take full advantage of high-growth markets.”
Based on the continued demand strength for Network and Power products, which is expected to more than offset sequential-quarter declines in shipments of audio products and direct-to-OEM mobile antennas, Technitrol expects third-quarter 2010
Revenues from continuing operations to be in the range of $115 million to $120 million . Non-GAAP operating profit is expected to be between $7.5 million and $8.5 million .
Analyst estimates:
2011 EPS are expected to increase to $0.58 ($0.50 fully taxed) from meager expectations in 2010.
GeoTeam ® note : We have owned TNL in the past with very rewarding results.
