Acme Packet Beats Estimates - Analyst Blog

Acme Packet Inc. (APKT) reported GAAP diluted earnings per share of 21 cents for the fourth quarter 2010, ahead of Zacks Consensus Estimate of 19 cents. The result compares favorably with last year's 14 cents.

The non-GAAP earnings provided by the company was 26 cents per share, which increased significantly from 11 cents in the previous year quarter.

For the financial year 2010, the GAAP earnings reported by the company was 63 cents per share, up considerably from previous year earnings of 28 cents. Zacks Consensus had estimated the full year earnings of 62 cents. On non-GAAP basis, the earnings came at 80 cents per share and compared favorably with previous year earnings of 35 cents per share.     

Quarter in Detail

Revenue for the quarter was $70.2 million, up 70.0% from the previous year quarter and 24.4% sequentially. The reported revenue was way ahead of Zacks Consensus Estimate of $61.0 million. On a segment basis, product revenue increased 78.5% on a yearly basis while revenue from maintenance, support and service increased 41.8% from the previous year quarter.

For the financial year 2010, Acme reported revenue of $231.2 million, which not only increased 63.0% from the prior year but also beat the Zacks Consensus Estimate of $222.0 million comfortably.

Gross profit increased 77.4% to $58.9 million from last year. Gross margin increased 3.5 percentage points from the previous year quarter to 83.9%.

Operating profit increased 220.3% from the year ago quarter to $22.1 million. Operating margin increased 14.8 percentage points to 31.5%.

Outlook

The company raised its outlook for 2011 based on positive trends in its business. Management expects total revenue to be approximately $300.0 million for 2011. The GAAP diluted earnings is expected at around 76 cents per share and non-GAAP diluted earnings to be approximately $1.05 per share.

Conclusion

Analyst estimates have been rising in the run up to the earnings release with one analyst raising its estimates in the last seven days. The average estimate was 19 cents when the company reported. We note that Acme Packet has consistently exceeded estimates over the past year or so. The average surprise in the preceding 4 quarters is a positive 38.46%, and another positive surprise was therefore expected.

Acme faces stiff competition from Cisco Systems Inc. (CSCO) and Juniper Networks Inc. (JNPR).

We currently have Zacks #1 Rank for Acme Packet, which translates into a Strong Buy rating on short-term basis. We have an Outperform recommendation on long-term basis.

 
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