Compass Diversified Holdings Meets on the Top Line, Misses Where It Counts

Compass Diversified Holdings (NYSE: CODI  ) reported earnings on Aug. 7. Here are the numbers you need to know.

The 10-second takeaway
For the quarter ended June 30 (Q2), Compass Diversified Holdings met expectations on revenues and missed estimates on earnings per share.

Compared to the prior-year quarter, revenue dropped significantly and GAAP earnings per share shrank to zero.

Gross margins improved, operating margins increased, net margins dropped.

Revenue details
Compass Diversified Holdings reported revenue of $230.0 million. The five analysts polled by S&P Capital IQ predicted sales of $228.7 million on the same basis. GAAP reported sales were 46% lower than the prior-year quarter's $428.1 million.

Source: S&P Capital IQ. Quarterly periods. Dollar amounts in millions. Non-GAAP figures may vary to maintain comparability with estimates.

EPS details
EPS came in at $0.03. The three earnings estimates compiled by S&P Capital IQ predicted $0.14 per share. GAAP EPS contracted to zero from the prior-year quarter's $0.14.

Source: S&P Capital IQ. Quarterly periods. Non-GAAP figures may vary to maintain comparability with estimates.

Margin details
For the quarter, gross margin was 31.7%, 970 basis points better than the prior-year quarter. Operating margin was 9.1%, 490 basis points better than the prior-year quarter. Net margin was 0.0%, 150 basis points worse than the prior-year quarter.

Looking ahead
Next quarter's average estimate for revenue is $231.4 million. On the bottom line, the average EPS estimate is $0.21.

Next year's average estimate for revenue is $885.2 million. The average EPS estimate is $0.46.

Investor sentiment
The stock has a five-star rating (out of five) at Motley Fool CAPS, with 310 members out of 317 rating the stock outperform, and seven members rating it underperform. Among 77 CAPS All-Star picks (recommendations by the highest-ranked CAPS members), 77 give Compass Diversified Holdings a green thumbs-up.

Of Wall Street recommendations tracked by S&P Capital IQ, the average opinion on Compass Diversified Holdings is buy, with an average price target of $16.10.

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Seth Jayson had no position in any company mentioned here at the time of publication. You can view his stock holdings here. He is co-advisor of Motley Fool Hidden Gems, which provides new small-cap ideas every month, backed by a real-money portfolio. The Motley Fool has no positions in the stocks mentioned above. 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.

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Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On October 24, 2012, at 9:36 AM, Swmbkrn wrote:

    With some past respect to the Fool in general and Seth in particular, this article is another step closer to the quarterly numbers analysis that MF used to mock back when you were outside the Wall Street beat. Your articles generally tease us that insight can only be gained by joining your services.

    As you used to point out, numbers are important, but can be misleading when looking at companies such as Compass which are actively buying and molding aquisitions. A better analysis at this company would examine their ongoing portfolio of aquisitions and look at whether there is a long term plan for the business, or would at least temper the numbers above by noting that a diverse business like this one will not be summed up easily by these metrics. My read is that this business is buying some businesses in out of favor and low profit margin niches in hopes that this deployment of capital will lead to long term growth. Kinda sounds like the old Motley Gems type businesses.

    Anyway, you guys are now so swept up in the teasers and selling your own business that you have forgotten why you became the go-to place for investors. I will respectfully continue to use Seeking Alpha for insights and put your comments back on ignore. So sad.

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