Avocent Corporation

Avocent Corporation (AVCT) recently reaffirmed its fourth quarter guidance after posting record third quarter revenue. International sales also jumped 32%. AVCT has a forward P/E of 10.6.

Company Description

Avocent provides IT infrastructure to data centers, small/medium businesses and branch offices around the world. The company's products include local and remote switching, serial console servers, wireless, mobile and video display services.

Avocent's sells to some of the largest companies in the world, including Microsoft, Intel, GE, ExxonMobil and Home Depot.

AVCT Reaffirms Fourth Quarter Guidance

Given current economic conditions, many companies are announcing forecast revisions. Avocent is not one of them. On Nov 12, the company reaffirmed its Oct 21 fourth-quarter guidance.

Revenue is still expected to be in the range of $175 to $185 million compared with revenue of $155.4 million in the fourth quarter of 2007.

Earnings per share for the fourth quarter are forecast in the range of 55 cents to 63 cents compared to earnings of 28 cents in the fourth quarter of 2007.

Third-Quarter Revenue Grows 13%

On Oct 21, Avocent reported third-quarter earnings that beat Wall Street estimates by 81%. Revenue grew 13% to a record $183 million from $162.1 million in the year ago period.

Revenue growth was spurred by double digit sales growth from branded and OEM products. Management Systems sales rose 7%. LANDesk sales surged 45% to $41.6 million.

International sales were hot, rising 32% to $88.2 million, and accounted for nearly 48% of total sales in the quarter. Europe and Asia saw strong demand that made up for the flat sales in the U.S.

The company also saw revenue benefit from the acquisitions of Touchpaper and Ergo that were completed in the third quarter.

Earnings per share were 67 cents, up from 56 cents in 2007. Analysts expected only 37 cents.

Importantly in this tight credit environment, Avocent had cash and cash equivalents of $115 million at the end of the quarter.

Consensus Estimates Rise

Analysts have been slow in updating estimates based on the company's recent guidance. Fourth-quarter estimates are up 6 cents to 44 cents in the last 60 days- well below the company's guidance of 55 to 63 cents.

2008 full-year consensus estimates rose 23 cents to $1.49 per share in the last 2 months.

Value Fundamentals

Avocent is a Zacks #1 Rank (strong buy) stock. It has surprised on estimates 3 out of the last 4 quarters by an average of 25.05%.

AVCT is trading at 10.6x forward earnings. Its price-to-book is 0.94.