Why Shares of Blackhawk Network Holdings, Inc. Soared

Is BlackHawk Network Holdings' jump material?

Ashraf Eassa
Ashraf Eassa
Jul 17, 2014 at 12:19PM
Technology and Telecom

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 Blackhawk Network Holdings (NASDAQ:HAWK) rose by as much as 11.5% in trading this morning after the company announced Q2 results that beat its guidance as well as sell-side estimates.

So what: In particular, the company reported operating revenues of $283.9 million, up 26% from the prior year period. GAAP diluted earnings per share came in at $0.09, more than double the $0.04 number that the company posted in the prior year period. These numbers easily cruised past analyst consensus of $257 million and $0.06, respectively.

Now what: Though the company handily beat sell-side consensus for the quarter, management reaffirmed its prior full-year guidance of $670-$690 million in sales (representing 24%-28% year over year revenue growth) as well as adjusted EBITDA guidance of $137-$142 million (up 20%-24%). All of this leads to adjusted net income of $64-$67 million, representing 11%-16% growth.

With 53.74 million shares outstanding, earnings per share are expected to be between $1.19 and $1.24. Sell-side consensus sits in the middle at $1.23 per share, so some optimism is being baked in here. Looking further out, the sell-side is looking for revenue growth of 17.8% in the coming fiscal year with earnings-per-share growth of 22%. If the company can hit these numbers, then the shares today trade for just over 19 times fiscal 2015 earnings. Not dirt cheap, but if the company can continue growing its top and bottom lines at double digit figures, it could be worth a closer look.