Thought the call was frank and without spin, which is refreshing, rather than charging bullish. With the contextualizing of the markets in which the company is facing competition, the strong cash and cash flow trajectory of the company, the relatively high short interest in the stock and the promise of a buy-back, the stock is well poised.
Neutral Tandem Shares Rise As 4Q Results Reassure Investors 9 minutes ago - Dow Jones News
Related Companies Symbol Last %Chg TNDM 16.43 8.23% As of 2:14 PM ET 2/16/10
By Shara Tibken Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)--Shares of Neutral Tandem Inc. (TNDM) climbed Tuesday after the wireless interconnection services company's fourth-quarter results reassured investors. While earnings missed Street estimates by a penny and revenue fell slightly short of expectations, the company projected 2010 revenue in line with analysts' expectations, announced a new ethernet exchange service and said it is planning to buy back $25 million in stock. Neutral Tandem essentially acts as a switchboard between wireless carriers. It makes money by connecting callers from different services at lower rates than those offered by competing local phone companies. Stephens analyst Barry McCarver said investors have been concerned recently about volume declines and pricing. "There's reason for worry, but it was way overshot how bad the business has gotten," McCarver said. "The company reported and missed EPS by a penny, but they were able to provide guidance for 2010 that suggests the stock is worth quite a bit more than the $15 and change it was at prior to the open." In recent trading, shares climbed 8.8% to $16.52. Over the past 12 months, shares have dropped 17%, and they're down 30% over the past three. Shares have been under pressure on concerns about competition and about the transition to voice over Internet protocol, or VOIP, technology from traditional, circuit-switched networks. Analysts have said the transition, which will likely be a multi-year or even multi-decade process, will probably eventually affect Neutral Tandem's business model. To help diversify, Neutral Tandem said Tuesday it is introducing a new ethernet exchange service for voice, data and video. "They don't have any revenue expectations [from that] for 2010 built into guidance," Avondale Partners analyst John Bright said, adding they do have about $3 million to $4 million in operating expenses built in. "To the degree that they're successful in this environment, that would be upside to estimates." He said that the fear of a slowdown in Neutral Tandem's core minutes business was overstated going into fourth-quarter results, though fears about competition are valid. "But with the certainty of the 2010 outlook as given, I think investors have reason to believe management can address competition and diversify revenue streams going forward," Bright said. Early Tuesday, Neutral Tandem reported earnings of $10.5 million, or 31 cents a share, up from $8.2 million, or 25 cents a share, a year earlier. Revenue jumped 28% to $44.7 million, boosted by an increase in the number of minutes carried over the network and continued penetration into existing markets.
Analysts polled by Thomson Reuters projected per-share earnings of 32 cents on revenue of $45 million. Billed minutes increased 32% to 23.8 million. In January, Neutral Tandem said it expected to report 2009 revenue toward the mid-point of its previous estimate of $168 million to $170 million. At the time, analysts said the projections indicated growth stalled in the fourth quarter as competition took its toll. The company ended up reporting year revenue of $168.9 million. President and Chief Executive Rian J. Wren said in a conference call Tuesday, according to a FactSet transcript, that Neutral Tandem did experience some headwinds in the fourth quarter. "Both competitive and economic pressures combined and caused revenue to come in lighter than we had hoped in the fourth quarter," Wren said. Looking forward, Neutral Tandem projected 2010 revenue of $185 million to $200 million on adjusted EBITDA of $81 million to $96 million. The Street most recently projected revenue of $198 million.