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Momentum

Parametric Technology Corporation (PMTC)

Parametric Technology Corporation or “PTC” for short is in the business of helping discrete manufacturers succeed by meeting their globalization, time-to-market, and operational efficiency objectives.

They are a technology solution that provides an engine, roadmap and more for companies in many industries looking to bring new products to market cheaply and efficiently or improve profitability and design.

As populations grow, economies improve and we evolve as a culture it becomes more important for new and existing products that improve and economize our lives to make it to multiple markets quickly and easily.  PMTC provides solutions and technologies to help make that happen.   

Company Description & Developments
Parametric Technology Corporation is a fast growing technology and consulting company that services a myriad of customers across all industries.  At present, PTC services 27,000 customers around the world from automotive to electronics to motorcycles, aircraft and more.

PTC consults with customers on several levels in depth before they figure out how to improve their business, open up bottlenecks and increase sales and profitability.

They offer everything from IT consolidation, materials management and software solutions to warranty management and globalization and offer strategy for customers to compete in a global marketplace.    

PTC also specializes in Multi-CAD design which can help with creating product variables and tweaking products for production and distribution in diverse markets. An example might be a new car that is first designed for distribution in America, but the manufacturer wants to sell this car overseas where components and sources may be different; the steering wheel is on the other side, buyers want different options, etc.  PTC will help design and manage those manufacturing variables and get the product to market.

What interests me about PTC is the fact that they are not only represented in just about every market out there, but they provide a service that is in demand in good and bad times.  When economies are slowing, companies want to improve efficiency, cut costs and sell more stuff.  In booming economic times, meeting increased demand may be at the top of the list.  In either scenario, PTC stands to benefit. 

Of course, theory and execution are two different things, but Parametric is still seeing year over year growth. 

Financial Profile
PMTC is a mid-cap (3.15 billion) company that is trading at about 20.7 times forward (expectations for next quarter) earnings.  PMTC became a Zacks Rank 1 strong buy on January 31st, 2011.

Parametric Technology Corporation reported a quarterly sales drop of 6% at their last earnings report and saw a 28% drop in EPS for the same period.  Annual sales were up 15.5% compared to (fiscal) FY2010 with total sales of roughly 1.17 billion in FY2011. 

PTC earnings increased from $0.63 in FY2010 to $0.88 in FY2011.  They are expected to earn $1.28 in FY2012 according to the Zacks Consensus Estimate. 

Earnings Estimates
Parametric guided 2012 earnings higher than expectations during their last report.  The CEO noted “This year, in FY '12, we are again expecting to meet or exceed our revenue growth goal of 12%, and we feel confident that we will expand margins by another 2 percentage points to take our margins to around 20%.”

PMTC reported continued profitability in 2011 and is expected to generate $0.27 in income this quarter when they report Q22012 results on April 25th.

PMTC saw strong Q12012 revenue that was 20% higher when compared to the year prior.  Parametric has surprised analysts to the upside 2 of the past 4 quarters at an average of 1.89%.

Of the 9 analysts who cover PMTC, the consensus is for the company to grow earnings by 46% in the current year (FY2012) and roughly 23% in FY2013. 

In terms of the magnitude of analyst estimate trends, we are seeing all of the consensus estimates higher than they were 90 days ago for the current and next quarters as well as FY2012 and FY2013. 

Market Performance & Technicals
PMTC has had an interesting year.  The second half of 2011 proved to be a tough time for the stock, hitting a low of $14.25 before building back in some support and then momentum in the past two months.

It’s weakness shows susceptibility to the broad market which coincides with its elevated beta of 1.7.  That high beta could lead to a sharp move lower if markets corrected.

The good news is that the stock is consolidating a bit at these levels and is forming some support right around $26.  Below that are the 50 and 200 day moving averages of $22.43 and $20.48 which will also be support levels. 

PMTC has exceeded the S&P 500’s performance in the past year by 9% and outpaced it by over 15% in the past 3 months during its recent rally.  The stock remains in a bullish trend and has maintained its momentum in the past month, leading the index by about 2%.    

Look for a breakout of 2-5% above the 52 week high of $57.75, if the stock can close above that level.

Jared A Levy is the Momentum Stock Strategist for Zacks.com. He is also the Editor in charge of the market-beating Zacks Whisper Trader Service.

 

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