CalAmp (NASDAQ:CAMP) investors finally found reason to cheer in a year filled with disappointment on Monday afternoon. The connectivity specialist came through with better-than-expected earnings for the second quarter of its 2015 fiscal year, reporting revenue of $59.2 million and adjusted EPS of $0.21 after previously nudging its own guidance for this quarter down to a range of $57 million to $61 million in revenue and $0.17 to $0.21 in EPS. Wall Street responded to that guidance by recalibrating its consensus at $59 million in revenue and $0.17 in EPS, so the bottom-line beat is particularly positive.

CalAmp continues its recent tendency to guide Wall Street's expectations lower, but there is at least a silver lining in its full-year projections. The company anticipates that the third quarter of fiscal 2015 will result in revenue in the $61 million to $65 million range, with adjusted EPS ranging from $0.21 to $0.25. The midpoint of both guidance ranges both fall below Wall Street's consensus for $65.2 million in revenue and $0.24 in EPS for the third quarter. However, full-year guidance now calls for revenue to range from $250 million to $255 million, producing adjusted EPS in the range of $0.88 to $0.94. This is roughly in line with analyst expectations  for $253 million in revenue and $0.91 in EPS for the full year.

Let's take a look at CalAmp's recent progress, and see how both its current and upcoming quarters look in comparison to prior periods.

Campearningsq
Sources: CalAmp quarterly filings.
* Q3 2015 (in blue) shows the midpoint of CalAmp's guidance for that quarter.

After several years of rapid top-line growth, it appears that CalAmp hit a wall going into the 2015 fiscal year that it may not fully climb past until the 2016 fiscal year begins. The midpoint of its third-quarter guidance projects a slight decline in revenue from the year-ago quarter, which is a bit concerning in light of the fact that CalAmp's top line barely grew at all in this quarter.

Campearningsgrowthq
Sources: CalAmp quarterly filings.
* Q3 2015 (in blue) shows the midpoint of CalAmp's guidance for that quarter.

One likely explanation is that CalAmp is becoming almost entirely reliant on its Wireless Datacom segment, but its other major segment (Satellite) has lost a lot of revenue over the past year. Wireless Datacom grew 6% year-over-year to reach $50.2 million in revenue for the second quarter, but this only managed to offset continued weakness in the company's Satellite segment, which dropped 22% year-over-year to $9 million in revenue.

Reporting Period

Wireless Datacom Revenue (and % of total)

Satellite Revenue (and % of total)

Q2 2013

$34.2 million ... (78%)

$9.8 million ... (22%)

Q2 2014 

$47.2 million ... (80%)

$11.6 million ... (20%)

Q2 2015 

$50.2 million ... (86%)

$9 million ... (14%)

Source: CalAmp earnings report.

Investors seem encouraged by CalAmp's full-year guidance and thus willing to overlook what's likely to be an underwhelming third quarter.Perhaps they should be: based upon CalAmp's own projections, the fourth quarter should see revenue of roughly $71.3 million with $0.28 in EPS, and both would be record high financial results for the company.

CalAmp seems poised to rise on its relationship with Caterpillar (NYSE:CAT), the "heavy equipment OEM customer" company executives highlighted in the report as likely to contribute up to $10 million in second-half revenue. Caterpillar will thus become a significant driver of CalAmp's short-term growth, but this reliance on major customers tends to make CalAmp's earnings rather chunky. Investors should continue to keep an eye out for reports of other large deals, as a broader range of major customers will be essential to CalAmp as it attempts to move from the sidelines to center stage as the Internet of Things takes shape.

Alex Planes owns shares of CalAmp. Follow him on Twitter @TMFBiggles for more insight into investing, markets, economic history, and cutting-edge technology.

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