SPAR
It operates through three segments: Emergency Response Vehicles, Delivery and Service Vehicles, and Specialty Chassis and Vehicles. The Emergency Response Vehicles segment offers emergency response chassis and bodies, and aerial ladder components. The Delivery and Service Vehicles segment provides walk-in vans for use in the package delivery, one-way truck rental, bakery/snack delivery, utility, and linen/uniform rental businesses; and commercial truck bodies, as well as interior equipment up fitting and aftermarket parts. The Specialty Chassis and Vehicles segment offers motor home chassis, defense vehicles, and other specialty chassis, as well as distributes related aftermarket parts and assemblies.
EARNINGS WINNER in previous quarter
Spartan Motors (NASDAQ:SPAR): Q1 EPS of $0.02 beats by $0.07.
Revenue of $133.73M (+4.2% Y/Y) beats by $1.33M.
This represents the first time since 2010 that the company has recorded positive net income in the first quarter
“Considering that the first quarter is typically one of our weaker periods, we believe we’re that we’re starting to see the favorable impact of initiatives we’ve taken to improve our financial results, including launching the Spartan production system, implementing lean manufacturing across our production facilities and closely managing overhead and operating expenses.”
” Demand for our product remains strong with sales of our most popular products showing gains for the first quarter of 2015.”
Strong Backlog Growth
|
Order backlog of $318.9 million at March 31, 2016, an increase of $54.3 million, or 20.5% from our backlog of $264.6 million at March 31, 2015. |
Operating Leverage and Increasing Margins
Gross Margin of 11.8% in the first quarter of 2016, compared to 9.0% in 2015, driven by favorable product mix in 2016 that included a higher proportion of parts and up-fit revenue.
“Our expected range of operating income is now between $7 million and $10 million based on higher revenue, favorable product mix, increased manufacturing efficiencies and lower overhead and operating expenses.”
“Based on the strong demand for our products, we’re raising our revenue estimate for the year by $10 million to a range of $570 million to $590 million. Our expected range of operating income is now between $7 million and $10 million based on higher revenue, favorable product mix, increased manufacturing efficiencies and lower overhead and operating expenses.”
Insider Buying
Insiders have been buying like crazy
CEO and CFO as long as other directors now have a sizable amount of shares, CFO owns 112,550, while the CEO holds around 200k shares.
Possible New Products and Catalysts
- The introduction of the Velocity, a new delivery vehicle design that combines the productivity of a walk-in van for multi-stop deliveries with the superior fuel economy of the Ford Transit chassis. (alr introduced)
- The Spartan Advanced Climate Control heating, ventilation and air conditioning (HVAC) system that improves heating and cooling within our fire truck cabs. This new HVAC system boasts a dynamic air velocity that on average is over 300 percent higher than our current system and greatly reduces the time needed to warm up or cool down the cab.
Spartan was “well received by our dealers and OEM partners.”
- New active braking system for motor home chassis. They were shown to our customers and received positive reviews. We believe this will be a meaningful contributor to growth in the motor home chassis business in the future.
- The expansion of our alliance with Isuzu to include the assembly of Isuzu’s new F-Series truck
“We are proud to be their assembly partner and looking forward to beginning production in early 2017.”
My Note and thoughts:
This guidance would mean profitable quarters coming ahead, based on past earnings report. While SPAR is set to meet tougher earnings comparison for the upcoming quarter and report on 3 July, with the 6/2015 quarter reporting 0.04, it is likely to deliver a good blockbuster earnings headline as long as they meet estimates, i.e SPAR reports 100% EPS growth.
The current revenue estimate for the next quarter is at 152.62m, a record high in recent years. With SGA pretty much constant at the 14-15 million(if no xtra R&D undertaken) and with a favorable product mix – current backlog growth largely attributed to a $15.7 million increase in equipment up-fit orders (will boost margins) and $34.5 million increase in vehicle orders,
I think the earnings estimate of 0.08 is pretty much conservative, and my own estimate is around 0.10ish or more if they hit the revenue guidance.
Looking at the past, the previous time they reported such earnings (0.10 eps) was at 10/30/2014 (albeit with an upside surprise of 100%), the stock flew.
Going even further back, in 2006,
It was a super momentum stock. Having a textbook breakout out of a sound base, and it increased around 5x in the short span of a year. So it has a history of moving and attracting attention from momentum players and institutions.
When looking at the subsequent quarters, the easy comparisons ( against 0.00, -$0.13), would serve as additional catalyst for the stock’s price, if holding for the longer term.
Technicals
This stock has a beautiful staircase chart, these kind of charts are the most powerful and potent. And it was also the chart that changed Jesse Stine’s life, the one that started his unbelievable run from 2003-2006.
Things i like
- Big volume Bars on up days are signs of insitutional accumulation.
- It is in a strong industry, with itself, STS and SRI being price leaders.
- Tight weekly closes prior to breakout******
Earnings on 8 August, still a while more. It would be ideal for the stock to trend down heading towards earnings, if we want to play the earnings breakout.
What is great about this chart is the extreme tight trading.
Tight trading often leads to strong breakouts.
“On a weekly chart, tightness is defined as small price variations from high to low for the week, with several consecutive weeks’ prices closing unchanged or remarkably near the previous week’s close.”
Tight trading is often a sign of institutional accumulation , with institutions accumulating stocks in a price zone with limit orders so as to not drive prices up. It also shows that selling pressure has stopped coming into the market and people are contented to hold on. This is generally very bullish and constructive, particularly in the context of an uptrend. It indicates, a temporary period of profit taking by weak investors, and that stocks are changing hands orderly to stronger investors.
mytradingjournalsite 