Stamps.com (STMP), an Internet-based postage and mailing company, soared more than 35% in the trading day following third-quarter results. The optimistic market response was driven by higher-than-expected revenue and EPS, as well as by management's decision to give its full-year outlook a formidable boost.
Stamps.com offers a wide range of postage and mailing services, including Postage On Demand. Image source: Stamps.com.
The results
|
Q3 2015 Actuals |
Q3 2014 Actuals |
Growth (YOY) | |
|---|---|---|---|
|
Sales |
$51.7 million |
$37.8 million |
37% |
|
Non-GAAP Income From Operations |
$20.4 million |
$11.7 million |
74% |
|
Non-GAAP EPS |
$1.14 |
$0.71 |
61% |
Data source: Quarterly earnings press releases.
What happened
- Revenue and non-GAAP EPS were 8% and 34% higher than expectations.
- Management increased its outlook for full-year EPS from a range of $3.10 to $3.50 to a range of $3.60 to $4.00.
- Management also revised its outlook for full-year revenue upward, from a previous range of $170 million to $190 million to a new range of $198 million to $208 million.
- Gross margin of 78.3% was up slightly from Stamps.com's year-ago gross margin of 77.4%.
- The company announced it has entered into a definitive agreement to acquire Encidia, a leading provider of high-volume shipping technologies and solutions, for $215 million in cash.
What management had to say
With a nod to its announced acquisition, management says the move is a big step for the company.
"Endicia represents a significant strategic investment in the high volume shipping area, and we are very excited to move forward with this acquisition," said Stamps.com Chairman and CEO Ken McBride.
McBride continued:
High volume and eCommerce shipping are the fastest growing segments of the mailing and shipping industry and this acquisition will allow us to continue to drive our growth in this very important area.
He also noted that its subsidiaries, Ship Station and ShipWorks, posted record financial results and were "strong" contributors to its performance.
Looking ahead
With the stock up about 135% in the past 12 months and hitting a fresh all-time high, investors should monitor the company's growth and forward-looking expectations in the coming quarters. In order to live up to the stock's increasingly premium valuation, management will need to continue to grow at rapid rates for the long haul, so look for evidence that growth is sustainable.
Furthermore, while recent acquisitions seem to have panned out exceptionally well, investors should keep an eye out for updates on its just-announced acquisition of Encidia to ensure that this acquisition, too, plays out handsomely.
