StarTek Earnings Preview

StarTek (NYSE: SRT  ) didn't hit the Street's expectations last quarter, but investors hope that it will rebound this quarter. The company will unveil its latest earnings on Thursday, Feb. 23. StarTek is a provider of business process optimization services for outsourced customer interactions.

What analysts say:

  • Buy, sell, or hold?: Analysts think investors should stand pat on StarTek with analysts unanimously rating it hold. Analysts don't like StarTek as much as competitor ExlService Holdings overall. Ten out of 11 analysts rate ExlService Holdings a buy compared to zero of two for StarTek. While analysts still rate the stock a hold, they are a little more optimistic about it compared to three months ago.
  • Revenue forecasts: On average, analysts predict $50.8 million in revenue this quarter. That would represent a decline of 21.4% from the year-ago quarter.
  • Wall Street earnings expectations: The average analyst estimate is a loss of $0.24 per share. Estimates range from a loss of $0.30 to a loss of $0.17.

What our community says:
CAPS All-Stars are split on StarTek, with 53.8% rating it an "outperform" and 46.2% giving it an "underperform" rating. StarTek's bearish CAPS rating of two out of five stars falls short of the Fool community sentiment.

Management:
Revenue has fallen for the past three quarters. The company's gross margin shrank by 2.9 percentage points in the last quarter. Revenue fell 21.2% while cost of sales fell 18.7% to $47.9 million from a year earlier.

Now let's get some insight into how efficient management is at running the business. Margins illustrate how efficiently a company captures portions of sales dollars. The company's net margin, which reflects what percentage of revenue becomes profit, has slipped downward year over year in the last two quarters. Here are StarTek's reported margins for the last four quarters:

Quarter

Q3

Q2

Q1

Q4

Gross Margin

7.3%

11.0%

12.4%

9.7%

Operating Margin

(13.2%)

(17.8%)

(3.9%)

(11.0%)

Net Margin

(13.1%)

(16.9%)

(4.3%)

(10.1%)

One final thing: If you want to keep tabs on StarTek movements, and for more analysis on the company, make sure you add it to your Watchlist.

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Earnings estimates provided by Zacks.

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