Compared with the prior-year period, new orders were up 35.3%, and gross margins remained higher, coming in at 63.1% from 57.5%. Once again full-year guidance was increased, this time to $0.95 to $1.05 per diluted share. It was only a few months ago that the company was guiding for $0.71 to $0.86 per diluted share.
Increased guidance, higher profits, sales in Europe/Africa up 50%, sales in Asia/Pacific up 66.7%, sales in the Americas -- oops, a marginal decrease. But since FARO has diversified itself into a worldwide company, weakness in one area has been easily overcome by strong performances elsewhere. The company will further diversify by marketing its computerized measuring and manufacturing tools in India and Korea. So what else could there be? Earnings did decrease to $0.22 per diluted share from $0.26 in the same period last year. But unless you read only the titles of articles, you'll know that last year included a $1.1 million arbitration settlement, which represented $0.08 per diluted share.
I'm chalking this one up as a small-cap stock being tossed around by day traders responding to earnings reports. FARO has consistently been increasing and outperforming guidance at the same time. It makes no sense fundamentally, either. With increasing cash, no debt, good return on equity, slowing dilution, and many other characteristics of a gem, a significant drop in price may simply mean it's time to add more shares.
Fool contributor John Bluis owns shares of FARO. Need a better way to see how FARO really measures up? Johnsuggests afree trialtothe Motley Fool Hidden Gems newsletter, which includes access to one of his favorite message boards.