What happened
Shares of big-screen display-screen maker Daktronics (NASDAQ: DAKT) jumped after reporting earnings Wednesday, closing the day up 11.5%. Daktronics reported net income of $0.19 per share, exactly matching analyst estimates, but the company also reported sales of $172.7 million, nearly $3 million more than Wall Street had expected.
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Daktronics’ fiscal 2019 Q2 sales were, however, up only 2% in comparison with last year’s Q2. Profit per share surged 19% — which probably explains why investors greeted the news with such enthusiasm.
So what
That being said, it’s important to note that the main reason profits increased year over year was that Daktronics paid much less in income taxes in this year’s second quarter ($533 million) than it did in last year’s ($2.3 billion). Had taxes held steady, Daktronics’ earnings would have declined, despite the sales increase.
Now what
CEO Reece Kurtenbach noted that with orders increasing 6.4% (i.e., three times faster than sales) in fiscal Q2, there’s reason to “remain optimistic about our long-term outlook” despite “cost headwinds on commodity and components” arising from President Trump’s trade war. Kurtenbach did not, however, give any specific guidance for sales or earnings in Daktronics’ press release.
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For what it’s worth, though, analysts who follow the company are also optimistic, predicting that fiscal Q3 2019 sales will rise more than 7% (and also more than three times as fast as Q2 sales) to $139.7 million.
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Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
