Iomega Q2
Earnings
by Jeff Fischer
(TMF Jeff)
Iomega Announces Second Quarter Earnings
of 19 Cents per Share, up 86%, and Trades at Two Times Sales
ALEXANDRIA, VA, (July 17, 1997)/FOOLWIRE/ -- After the market closed,
Iomega Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: IOM)") else Response.Write("(NYSE: IOM)") end if %> reported earnings of $26 million, or $0.19 per share
-- in line with estimates. Revenues climbed 41% to $400 million, from $284
million last year, same quarter. Iomega achieved the highest revenues in
its history, topping last year's fourth quarter record of $397 million.
Sequentially revenues grew 11% from the first quarter.
Gross margins increased three points to 29%, operating margins rose to 9.9%
from 9.0%, and net profit margins rose to 6.5% from 5.0%, while return on
equity
dropped from 34% to 30%.
Iomega achieved positive cash flow of $57 million, and cash and short-term
investments rose to $135 million, up $19 million. Total debt decreased to
$58 million from $96 million.
The company has now shipped over ten million personal storage devices, including
seven million Zip drives and over one million Jaz drives. Earnings would
have been $0.21 per share if not for the recall of 75,000 Jaz cartridges
-- but that's cheating. That was part of business -- you can hardly subtract
it, though it's good to know about, it hopefully being an unusual and one-time
expense.
Importantly Zip drive OEM sales reached nearly 30% of total Zip shipments
in the current quarter, despite some supply constraints which kept the company
from meeting demand completely. Iomega is, "Working hard to replenish Zip
drive inventory in the retail channel." Demand was strong, as evidenced by
the healthy rise in sales, even as the company entered the early summer.
Zip and Jaz disk-based product sales grew 51%, Jaz drive unit shipments increased
31%, and Ditto tape volume grew 2%. Geographically Iomega experienced strength
around the world. Sales in the Americas grew 28%, in Europe 91%, and in Asia
30%.
At the normal 4pm ET close of the New York Stock Exchange, Iomega's stock
was trading at $22, but by 5pm it was trading at $23 (the
Fool Portfolio will
be rewarded tomorrow if the stock stays up, as the port "printed" a close
of only $22 on today's numbers).
Sporting a market cap of $2.96 billion with $1.46 billion in trailing revenue,
the stock trades at two times sales. The run-rate (current results multiplied
by four), with $400 million in sales and $0.19 in earnings per share, calls
for $1.6 billion in revenue and $0.76 in earnings per share over the next
four quarters. This doesn't factor in the usually stronger fall and winter
seasons, though.
Estimates stand at $0.20 per share next quarter and $0.85 for the fiscal
year ended in December. The stock trades at 27 times that estimate. For 1998,
four analysts expect $1.14 per share. Iomega trades at 20 times that estimate,
while expected to grow earnings 81% this year and 34% next.
The current PEG
ratio on the stock comes to 0.71. This is based on a $23 share price with
a trailing P/E of 38, on $0.60 in trailing earnings, with $1.14 EPS estimated
for the year ended in six quarters. There are no long-term growth rates available
on which to figure the YPEG. A stock at $32.50 would result in a trailing
P/E of 54 and would put the PEG at exactly 1.0 -- the implied current fair
value based on only this measure.
For a company that has faced cash crunches in the past, mainly while ramping
up production, the strong positive cash flow is a welcome success. While
other
valuations
show a current ratio slightly above 2.0 (meaning that the company has twice
as much in current assets and cash as it does in current liabilities), and
a quick ratio of 1.50 (the same measure, but inventories are subtracted from
current assets). Both numbers are favorable. A quick ratio of over 1.0 is
usually adequate to pay the bills.
The conference
call synopsis. Fool on! |