Daktronics, Inc. Stock Up 19% on Earnings: Here's What You Need to Know

By Markets Fool.com


These kinds of major display projects can make Daktronics' results swing from quarter to quarter. Image source: Daktronics.

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What: Shares of specialty large-screen display-makerDaktronics, Inc.(NASDAQ: DAKT) are up 19.2% at 1:49 p.m. EDT on August 23, following release of the company's first-quarter earnings report.

So what: The company reported a $5.5 million profit in the quarter, good for $0.13 per share. This was well ahead of the $0.04 to $0.05 per-share profit estimates that Wall Street analysts were expecting. Daktronics also reported $157 million in revenue, well above the $147 million analyst estimate, and also 5% higher than sales were in last year's first quarter.The company also generated $4.5 million in positive free cash flow, and used $1.8 million of that cash to repurchase 300,000 shares of the company's stock.

Daktronics reported a 6% increase in orders in the quarter, which helped its backlog grow 9% sequentially, to $198 million, though it's down $7.6 million from the year-ago period.

Now what: The company operates a relatively seasonal business, with its displays often outdoors in parks, stadiums, school athletic facilities, and along highways. Furthermore, it often has very large and complex projects that can add further "lumpiness" to its results from quarter to quarter. There's also the impact of foreign exchange and global macroeconomics, as many of the company's biggest opportunities are outside the U.S.

CEO Reece Kurtenbach said that management is pleased with the strong start to the year, but also pointed out that they're seeing customers delay purchases due to macroeconomic concerns. For this reason, the company will focus its efforts on cost containment in the interim as the global economic environment plays out.

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In other words, there's a lot of reason to expect more up-and-down quarters to come as major customers pace their investments in new and updated display systems based on their own cash flows and economic opportunities. That's going to likely mean that Daktronics shares will remain volatile for the foreseeable future. Invest according to your comfort level with those likely big price swings.

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Jason Hall has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.