Why Comtech Telecommunication Shares Surged Today

What happened

Shares of Comtech Telecommunications (NASDAQ: CMTL) have surged today, up by 25% as of 1:40 p.m. EST, after the company reported fiscal second-quarter earnings.

So what

Revenue in the quarter came in at $139 million, just barely beating the consensus estimate of $138.7 million. Net income was $6.6 million, or $0.28 per share, but this included a one-time cash settlement of $10 million that the company received related to intellectual property litigation. Excluding this one-time item, adjusted earnings per share was $0.01. Comtech finished out the quarter with $63.1 million in cash and cash equivalents.

Image source: Getty Images.

Now what

The company also said it continues to shift the focus of its government business away from bidding on large commodity service contracts, instead favoring more profitable contracts for its "niche products." Comtech is slightly reducing its guidance for fiscal 2017, with sales now expected to be in the range of $570 million to $580 million, down from the prior outlook of $600 million. This reduction is due to the aforementioned shift in strategy within the government segment. Comtech is making progress in cost-cutting and the product mix continues to shift favorably, so it is expecting a sequential uptick in adjusted EBITDA for the fiscal third quarter.

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Evan Niu, CFA has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.