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Comtech (CMTL) to Report Q4 Earnings: What's in the Offing?

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Comtech Telecommunications Corp. (CMTL - Free Report) is scheduled to report fourth-quarter fiscal 2019 results (ended Jul 31, 2019) after the closing bell on Sep 24.

In the last reported quarter, the company delivered positive earnings surprise of 100%. Notably, Comtech surpassed the Zacks Consensus Estimate for earnings in each of the trailing four quarters, the average surprise being 216.7%.

Factors at Play

Comtech’s acquisition of Solacom and the GD NG-911 business has significantly enhanced its ability to deliver innovative market-leading products and services to public safety agencies worldwide.

In May 2019, Comtech’s Command & Control Technologies group, which is part of its Government Solutions segment, got additional funding worth $14.7 million from the U.S. Army. The company is providing Very Small Aperture Terminals to support the capabilities of warfighters.

The Command & Control Technologies group provides highly-mobile C4ISR (Command, Control, Communications, Computers, Intelligence, Surveillance and Reconnaissance) solutions to help bridge the security gap in an era of information-based, network-centric warfare. The Government Solutions segment serves large government end-users that require mission-critical technologies and systems.   

Comtech has created a niche market for secure wireless solutions to defend global security and improve public safety. The company continues to provide market-leading products for messaging, location and deployable wireless communications. It offers services to integrate networks, servers, gateways and intelligent peripherals, and provides transmission responses to users.

Comtech expects fiscal fourth-quarter GAAP earnings to be impacted by a charge of nearly $2.2 million or 7 cents per share, primarily related to a targeted acquisition and its enterprise technology product solutions repositioning. For the to-be-reported quarter, the Zacks Consensus Estimate for total revenues stands at $165 million. It posted revenues of $167 million in the prior-year quarter. Adjusted earnings per share are pegged at 10 cents. The company reported earnings of 40 cents a year ago.

What Our Model Says

Our proven model does not conclusively show that Comtech is likely to beat earnings this quarter as it does not possess one of the two key components. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. This is not the case here as you’ll see below:

Earnings ESP: Comtech’s Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is 0.00% as both are pegged at 10 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Comtech Telecommunications Corp. Price and EPS Surprise

Zacks Rank: Comtech currently has a Zacks Rank #3, which increases the predictive power of ESP. However, the company’s 0.00% Earnings ESP makes surprise prediction difficult.

Note that we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated) going into the earnings announcement, especially when the company is seeing a negative estimate revisions momentum.

Stocks to Consider

Here are some companies that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter:

Micron Technology, Inc. (MU - Free Report) with an Earnings ESP of +7.64% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

FactSet Research Systems Inc. (FDS - Free Report) with an Earnings ESP of +0.57% and a Zacks Rank #3.  

Lamb Weston Holdings, Inc. (LW - Free Report) with an Earnings ESP of +4.18% and a Zacks Rank #3.

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