RF Industries Gets Whacked After Earnings (RFIL)

Fiber optic cable maker RF Industries RFIL reported second quarter results Wednesday that showed strong year-over-year growth. However, markets were unimpressed as shares were dumped in early trade due to the company noting the winding down of key contracts and the lack of replacement business in the near future.

Second Quarter

For the fiscal second quarter ended April 30, RF Industries reported earnings per diluted share of $0.14 as net income rose $1.2 million. Earnings per share were 92 percent higher from the second quarter a year ago when the company earned $0.08 per diluted share.

Revenues were also higher in the quarter than a year ago. Revenues grew 37 percent to $9.2 million from $6.7 million a year ago. The company noted that growth driven by customized connectivity solutions for wireless infrastructure.

Dividend

On Monday, the company declared a dividend of $0.07 per diluted share. The company reported cash of $8.5 million on the balance sheet, meaning that the company has more than enough cash to make this dividend payment. The company also reported no debt and a current ratio of 7:1.

Management Discussion

Howard Hill, Chief Executive Officer, commented, "We are pleased to report record revenue. Our strength lies in our ability to design and manufacture complex cable assembly products that meet or surpass the connectivity needs of our end users and, as a result, we've seen continued strong demand for our offerings. In particular, we have been focused on growing our position as a leading provider of full service, custom interconnect solutions to the wireless infrastructure industry."

"During the quarter, we saw the positive impact of this long term strategy with particularly strong sales from our Cables Unlimited division, which realized continued marketplace acceptance of its OptiFlex(TM) Hybrid Custom Fiber Optic and DC Power Cabling solution for wireless towers."

"As expected, revenues at the RF Wireless segment decreased due to the winding down of the contract with the Los Angeles County Fire Department, which was entered into in November 2011. Accordingly, the completion of that contract will result in a decrease in revenues from that segment in future periods until other, larger contracts are entered into."

"Nonetheless, we saw very strong performance on a consolidated basis, with revenue growth at our remaining business segments. Our balance sheet, with a strong cash position and no debt, provides us with the ability to return capital to shareholders through a dividend while also supporting our long term growth strategy."

Mr. Hill concluded, "Our Company is part of a dynamic industry where the demand for wireless connectivity is driving improvements to the wireless infrastructure and we believe that our customized solutions position us well to capitalize on new opportunities in this space."

Market Impact

Shares traded lower in early trade Wednesday following the news. RF shares fell 7.38 percent after declining more than 10 percent to trade $6.59 as of 10:13 am.