Earnings Progress Reports: RAIL, FIT, RELL

 | May 04, 2018 | 12:00 PM EDT
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You've got to love earnings season, which has brought with it the usual array of surprises that keep it all the more interesting. As a longer-term oriented value investor, I usually don't put too much emphasis on a single quarter's results, and try to view them more as progress reports as opposed to defining events. As usual, it's been a mixed bag in the convoluted world of value.

FreightCar America (RAIL) delivered a positive surprise, exceeding estimates on both revenue ($83 million versus $61 million consensus) and earnings per share (loss of 51 cents versus 61 cent loss consensus) which drove shares up 14.5% yesterday. While there's still work to be done, and the company is still in the red, progress has been made. In addition, and what is keeping the stock price afloat is the still solid balance sheet, which boasted $117.5 million, or more than $9.50 per share in cash and marketable securities, and no debt. Double-Net RAIL trades at just 1.68 X net current asset value (current assets less total liabilities), and should look enticing to potential acquirers.

Fitbit (FIT) also reported better than expected results on the earnings, beating earnings estimates by 2 cents (loss of 19 cents, versus 21 cent loss consensus), while revenue was in-line with estimates. However, the market not surprisingly reacted negatively to guidance for a second quarter drop in revenue ($275-$295 million versus $310 million consensus), and earnings ($-27 to -23 cents, versus -11 cent consensus), and the stock was hammered, down 12%. However, the company is sticking to previous full-year revenue guidance of $1.5 million, for what that's worth.

Still, at this point the market remains very skeptical of FIT, despite its balance sheet that boasts $658 million or $2.75 per share in cash and short-term marketable securities, and no debt. The company's comeback, if able to deliver on it, continues to be pushed into the future, and the market is all but out of patience. After yesterday's drubbing, FIT trades at 2.04 X net current asset value, but I'm sure that many of my deep-value cohorts think I should have my head examined for owing or following this name.

Last but not least, former net/net Richardson Electronics (RELL) did something last month that it has not in years; putting up two consecutive profitable quarters. Under the radar RELL handily beat the "consensus" for the third quarter (just one analyst covers the name) on both revenue ($41.65 million versus $36.2 million) and earnings per share (4 cents versus breakeven).Shares are up 40% year to date, and trade near a 3 ½ year high. The company ended the quarter with nearly $60 million or $4.64 per share in cash and no debt, and trades at just 1.1 X net current asset value.

I am looking forward to more "progress" (or lack of progress) reports.

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