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Shares of CalAmp (NASDAQ:CAMP) dropped 10% early Wednesday after the wireless communications specialist turned in solid fiscal 2015 third-quarter results, but followed with weaker than expected forward revenue guidance.
Why it's happening
Quarterly revenue remained essentially flat at $63.2 million, helped by 10% year-over-year growth in revenue for its wireless datacom business, to $54.6 million. However, that was undercut by a 37% decline in revenue in the satellite business, to $8.6 million. Combined, that translated to an 8.7% increase in adjusted earnings per share, to $0.25. Analysts, on average, had expected roughly the same revenue to result in earnings of just $0.23 per share.
For the current quarter, however, CalAmp expects revenue in the range of $66 million to $70 million, with adjusted net income per share of $0.26 to $0.30. Analysts were modeling earnings right in the middle of that range, but hoped for higher revenue of $71.1 million.
CalAmp CEO Michael Burdiek said during Tuesday's earnings conference call that satellite segment revenue is expected to reach roughly $8 million, or a decrease of roughly 25% year over year. That leaves CalAmp's more promising wireless datacom revenue stream with the remaining $58 million to $62 million, which would represent solid growth in the range of 17.9% to 26% over the same year-ago period. Burdiek also insisted that growth should continue "into 2016 and beyond" amid "very favorable market growth trends" for machine-to-machine applications.
In the end, that growth should maintain CalAmp shareholders' excitement. Keeping in mind that investors have known for some time CalAmp's satellite business is waning, I remained convinced the promise of this Internet of Things play remains firmly intact.
Steve Symington has no position in any stocks mentioned. The Motley Fool recommends CalAmp. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.