CalAmp Corp. Earnings: Can the Internet of Things Player Bounce Back?

On Tuesday, CalAmp (NASDAQ: CAMP  ) will release its quarterly report, and shareholders aren't happy with how shares of the provider of wireless communications products and services have fallen over the past several months. Tech giants Cisco Systems (NASDAQ: CSCO  ) and General Electric (NYSE: GE  ) have touted the potential of having billions of devices connected through the Internet in a concept that has become known as the Internet of Things, and CalAmp is working hard to try to take maximum advantage of the opportunity. Still, with so much competition, the company has gone through ups and downs in its efforts to find a lucrative niche in the space.

CalAmp provides hardware, software, and integrated services to help enterprise customers improve their wireless communications, with an eye toward ensuring constant availability, higher productivity, and lower costs for businesses seeking to expand their digital footprint. Providing satellite receivers and other related equipment has been a substantial part of CalAmp's overall business in the past, but the company has relied less on the satellite business in recent years in favor of ramping up its Internet of Things initiatives. Let's take an early look at what's been happening with CalAmp over the past quarter and what we're likely to see in its report.


Source: CalAmp.

Stats on CalAmp

Analyst EPS Estimate

$0.18

Change From Year-Ago EPS

12.5%

Revenue Estimate

$57.98 million

Change From Year-Ago Revenue

7.9%

Earnings Beats in Past 4 Quarters

3

Source: Yahoo! Finance.

Will CalAmp earnings growth start accelerating?
Investors have reduced their views on CalAmp earnings in recent months, cutting a nickel per share from their May-quarter estimates and reducing full-year projections for this fiscal year and next by 5% to 7%. The stock has suffered in response, falling almost 20% since late March.

CalAmp's February-quarter earnings report is what prompted the sell-off in the stock. Even though sales jumped 24%, including an even larger jump in its Wireless Datacom division, earnings came in lighter than investors had wanted to see. Even worse, CEO Michael Burdiek warned that May-quarter results would also come under pressure from a drop in business from one of its solar-industry clients. Despite assurances that the company's outlook would improve for the second half of the year, investors became concerned that CalAmp's rapid growth might start slowing down on a longer-term basis.

Source: CalAmp.

Yet few people argue that the Internet of Things won't become an important part of the landscape for the technology sector in the years to come. Cisco Systems has said on numerous occasions that the Internet of Things will create $19 trillion in wealth in the next 10 years, not only by helping increase interactivity but also by collecting valuable data for use in improving productivity and discovering previously unknown trends that can boost profits and cut costs. General Electric has already ramped up its efforts to collect data from products like locomotives and aircraft engines, identifying ways to save on maintenance costs and improve overall operating efficiency.

In order to establish and defend its niche in the Internet of Things industry, CalAmp needs to do two things. First, it needs to build and maintain relationships with large business customers, going beyond simply selling hardware in favor of an all-in-one package that includes not only the equipment to get the job done but also the monitoring software and services know-how to help those customers make the most of the data they'll collect. Second, with many small competitors seeking their own fortunes from the Internet of Things, CalAmp must keep an eye on how it can match some of the better ideas its rivals come up with. Continuing its history of strategic acquisitions is also likely to be a strong contributor to CalAmp's long-term growth.

In the CalAmp earnings report, watch closely to see if the company is able to deliver improved guidance for the second half of the year as it expected a couple months ago. If CalAmp can rebuild investor confidence that the company can go beyond its traditional fleet-management services to expand its influence in the Internet of Things, then its stock could start regaining the ground it lost over the past quarter.

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