Tekelec Earnings Preview

Tekelec (Nasdaq: TKLC  ) hasn't been able to establish an earnings trend, bouncing between beating and falling short of estimates during the past fiscal year. The company will unveil its latest earnings on Wednesday, Nov. 9. Tekelec is a provider of communication network software and systems that enable its customers to deliver an array of communications services including voice, text messaging, and mobile data services.

What analysts say:

• Buy, sell, or hold?: Analysts think investors should stand pat on Tekelec with eight of nine analysts rating it hold.
• Revenue forecasts: On average, analysts predict $102 million in revenue this quarter. That would represent a decline of 5.8% from the year-ago quarter.
• Wall Street earnings expectations: The average analyst estimate is earnings of $0.14 per share.

What our community says:
CAPS All-Stars are solidly behind the stock with 97.4% awarding it an "outperform" rating. The community at large concurs with the All-Stars with 94.7% giving it a rating of "outperform." Fools are bullish on Tekelec, though the message boards have been quiet lately with only 43 posts in the past 30 days. Even with a robust four out of five stars, Tekelec's CAPS rating falls a little short of the community's upbeat outlook.

Management:
Revenue has fallen for the past three quarters. The company's gross margin shrank by 13.4 percentage points in the last quarter. Revenue fell 7.1% while cost of sales rose 28.7% to $51.7 million from a year earlier.

Now let's look at how efficient management is at running the business. Traditionally, margins represent the efficiency with which companies capture portions of sales dollars. The following table shows gross, operating, and net margins over the past four quarters.

Quarter	Q1	Q4	Q3	Q2
Gross Margin	52.0%	53.7%	55.3%	63.0%
Operating Margin	(24.4%)	(14.6%)	0.4%	11.6%
Net Margin	(14.8%)	(8.9%)	(0.1%)	8.6%

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