PC Connection (PCCC - Snapshot Report) beats earnings for
the seventh straight quarter, analysts move estimates higher and the stock
is a Zacks #1 Rank (Strong Buy).
PC Connection operates under several companies that offer custom-
configured computer systems to individuals as well as government agencies
Good Earnings Streak
We have to go back to 4Q09 to see the last time the company had a negative
earnings surprise, a difficult time for many companies as the recession
bottomed out. Since that time, earnings surprises have pushed price
In the most recent quarter, the company reported earnings of $0.35 per share, topping the Zacks Consensus Earnings Estimate of $0.27 by $0.08. The December 2010 quarter, which will see comparisons during the next earnings report saw a two cent beat of the Zacks Consensus Earnings Estimate.
Among the positive news in the most recent quarter, the company noted
strong year over year growth from large accounts and the product mix
showed increases in every category. The desktop/server and notebook & PDA product lines each showed 17% growth from the prior year.
Dividend Buyers, and Sellers, are out
On December 7, the company paid a special one-time dividend to
shareholders of record in the amount of $0.40 per share. Typically an
aggressive growth company would retain this cash to invest in operations
instead of paying dividends to shareholders, but the move did alert a
number of investors to the name. Those who were hunting for a dividend
have likely moved on, buying the dividend and probably out of the name
before the end of the year.
Shares of PCCC are cheap by most valuation metrics, including a 0.14x
price to sales vs. and industry average of 0.76x. Value conscious
investors will appreciate that the company noted that the stock traded at
a discount to tangible book value at the end of 3Q11.
A look at a trailing PE of 10.7X compares favorably to the industry
average of 23.7x. As revenue and earnings improve, we expect the multiple to improve as well, but there has been contraction of the forward multiple of earnings for both PCCC and industry. Continued outperformance for PCCC will depend on earnings and revenue growth.
PCCC holds a Zacks #1 Rank (Strong Buy), in part, due to consistent
earnings increases from multiple analysts. A look at the price and
consensus chart below shows how higher earnings estimates help stocks see
Brian Bolan is the Aggressive Growth Stock Strategist for Zacks.com. He
is also the Editor in charge of the Zacks Home
Run Investor service