Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of NeuStar (NYSE: NSR) have settled on gains of roughly 8% this afternoon after peaking at 10% above yesterday's closing price. Investor optimism around the stock appears to be a mix of rejoicing over NeuStar's earnings beat last evening and anticipating the fruits of the company's upgraded full-year earnings guidance.
So what: NeuStar's second-quarter earnings report provided just enough outperformance to excite investors who've been cautious around government-focused businesses. The company's revenue came in at $220.4 million (a 7% year-over-year improvement), ahead of the Street's $219.4 million consensus, and adjusted earnings of $0.85 per share were $0.05 better than the $0.80 analyst consensus.
Looking ahead, NeuStar still expects $895 million to $915 million in revenue for the full fiscal year, about even with the $904.4 million consensus. However, the company's boosted its EPS guidance range to somewhere in the neighborhood of $3.38 to $3.53. Analysts were modeling $3.38 in EPS for 2013, so yesterday's upgrade was a welcome sight.
Now what: NeuStar shares have already gained 60% over the past year, but the stock's two-year average P/E of 17.8, according to Wolfram Alpha, is now 27% below its currently reported P/E of 24.4. There might be plenty of potential left, but the further away this stock gets from its historical averages, the harder it becomes to call it a great buy. Tread cautiously and do your homework here.
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