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Why Stock Is Up 20% After Earnings

By Rich Smith - Aug 7, 2020 at 11:19AM

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Earnings more than triple -- and could double again.

What happened

Shares of online postage provider (STMP) popped this morning in response to an estimates-thumping earnings report last night. Instead of the mere $1.26 per share that analysts thought would earn on sales of $153.3 million, Stamps did $206.7 million in business ... and earned $3.11!  

Yes, you read that right. earned more than twice what Wall Street expected it to. The fact that the stock is now up 20.3% (as of 11:40 a.m. EDT) seems only right.

Stock up with a glowing green arrow climbing on a stock screen

Image source: Getty Images.

So what

Now admittedly,'s profit as calculated according to generally accepted accounting principles (GAAP) wasn't quite as good as the pro forma profit stated above. Still, Stamps earned a very respectable $2.73 per share when calculated under GAAP. That was 248% better than what the company reported a year ago -- impressive when you consider that quarterly sales surged "only" 49% year over year.  

Now what is benefiting from its role facilitating e-commerce businesses that have "provided an important lifeline to many businesses and individuals in the context of the COVID-19 pandemic," observed CEO Ken McBride. And with COVID-19 still raging across the country, this is a trend that's unlikely to change in the near term.

Looking ahead to year-end, Stamps is therefore raising its revenue guidance for the full year to a range of $650 million to $725 million, and roughly doubling its guidance for net income to anywhere from $3.93 to $6.70 per diluted share. Pro forma profits will look even better, growing to "approximately $6.25 to $9.25."

At the midpoint, that's a cool $7.75 per share in profit is predicting, versus Wall Street's $5.10 per share forecast. No wonder investors are pleased.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool recommends The Motley Fool has a disclosure policy.

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