Telvent (TLVT) Posts Surprisingly Weak Earnings, Stock Crushed

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10:49:01 am on February 19, 2010

We’re almost exactly one month removed from Cramer’s bullish call on Telvent (TLVT) touting it as a great speculative play.  In that post I mentioned the call was irresponsible after such a torrid run and a quick read of the technicals would have indicated that distribution was coming in, a topping signal.  The stock was ripe for a correction, possibly a steep one.   The stock is down 30% since that call was made.  Granted, we all have bad calls and Cramer makes so many calls it’s easy to pick out a few bad ones.  However, calls like this one after such a big run bother me and there are way too many of them.

Anyway, enough of the rant.  The stock is down another 17% today after reporting surprisingly weak earnings and revenues.  The company reported an EPS of .78/share on revenues of $282 million which is a good number compares to any other quarter, but compared to the strong year ago quarter is off the mark.  Earnings are off about 10% and revenues off more than 20% compares to the year ago quarter.

New contracts signed during the 4th quarter was off about 40% from the year ago quarter and guidance for full year 2010 isn’t impressive.  The company expects organic revenue growth of only 3 – 5% and EPS growth of less than 10%.  Analysts expect EPS growth of 17% and revenue growth of 8%. 

When a stock more than quadruples in less than a year it needs to beat estimates by a wide margin to avoid selling off.  When a surprisingly negative report is issued,  the stock will get taken out to the wood shed. .. as TLVT is today. 

The CEO tried his best to spin the quarter positively..

“We have succeeded in closing one of the most challenging years in decades; we believe that the worst may be over. In addition to the continued top line growth, we have significantly improved our operating margins, which combined with the positive cash flow from operations and the EURO 968 million in backlog, make us feel confident to begin 2010.” Nice try!

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