Providing investors with the
tools to make informed decisions.
Providing investors with the
tools to make informed decisions.
 Tracking 1260 U.S. listed China Stocks and Counting...
 Tracking 3141 U.S. Stocks and Counting...

Conference Call Intel - Cpi Aerostructures (NYSE Amex:CVU)

Tuesday, February 16, 2010, 3:10 PM ET -

by Maj Soueidan, President GeoInvesting

Listening to conference calls is one of the many strategies I apply for gathering Intel on future prospects of companies. Even though these calls are considered public information, investors just don’t have the time to look beyond a press release, giving us a chance to take advantage of information inefficiencies.  I particularly salivate at opportunities to listen to calls between earning releases, such as investor presentations, when investors often become increasingly lazy. I look forward to selling them my shares at higher prices when the company repeats bullish information in its earnings press release.

As I just issued an update on Cpi Aerostructures (NYSE AMEX:CVU) on January 26, 2010, I was eager to listen to an investor presentation replay that took place on February 11, 2010.  I hoped to attain a better grasp on my assumption that CVU would report a stellar 2009 fourth quarter as well as glean insight into the growth outlook heading into 2010.

I have been on hundreds of conference calls and I can say that this is one of the most bullish I have experienced. So much so, I added to my position.  CEO, Ed Fred, was articulate and inferred several times that his aggressive EPS guidance for 2009 of $0.63 to $0.69 and long term growth expectations, supported by its new business model that focuses more on subcontracted work than primary government contracts, are still in tact.  I found this particularly interesting since this is similar strategy Electronic Control Securities (OTC BB:EKCS), a stock I just profiled on the street, has embarked upon.

Unfortunately, the company did not provide specific 2010 guidance.  I found this odd since during the presentation the company expressed confidence that it may able to achieve net income of $8 million in 2011 on $75 million in revenues.  As in my initial article, I am left to ponder what 2010 might look like. The problem lies with the three year compounded annual growth rate (CAGR) assumption CVU issued at the end of 2008 of 50% to 60% for net income and 30% to 35% for revenues.  Without getting too technical, the CAGR formula basically only takes into account your beginning and end year periods. So, over a three year period, as long as you hit the the year three number implied by the formula, it doesn’t matter what happens in year two. Regardless, loaded with the ammo of 2011 expectations and a confirmation of its long-term growth forecast, I came up with a best efforts 2010 EPS target of $0.96.  Analyst estimates are calling for 2010 EPS to reach $1.01.  I urge investors to make their own assumptions and listen to the conference call replay.

CVU plans to comment on 2010 guidance in its year end press release.

Additional key points from the presentation:

  • Has long term visibility due to contract pipeline and its emphasis as a subcontractor to defense companies such as Lockheed Martin (NYSE:LMT) , Northrop Grum Hol (NYSE:NOC) and Sikorsky Aircraft
  • Guidance does not include nearly 400 million of unawarded contract bids
  • Guidance does not account for the government having to devote funds to the repair of planes that return home from IRAQ.
  • Guidance does not include upside from contracts CVU is currently involved in.
  • Room for gross margin improvement from 25% to 30% - 35%.
  • Happy with results and will continue to get better
GeoInvesting.com Disclosure

Positions: Long CVU, EKCS

You agree that you shall not republish or redistribute in any medium any information on the GeoInvesting website without our express written authorization. You acknowledge that GeoInvesting is not registered as an exchange, broker-dealer or investment advisor under any federal or state securities laws, and that GeoInvesting has not provided you with any individualized investment advice or information. Nothing in the website should be construed to be an offer or sale of any security. You should consult your financial advisor before making any investment decision or engaging in any securities transaction as investing in any securities mentioned in the website may or may not be suitable to you or for your particular circumstances.