Earnings News and Notes

ICx Technologies [ICXT]

Losses narrowed in the quarter on 28% higher sales and sharply lower operating costs, which the company will continue to focus on. Analysts had expected ICx to post a two cent earnings per share profit in the quarter. Sales gains were attributed to demand from military and state and local customers in its Surveillance and Solutions business lines, which more than offset a drop in revenues from the Detection business. The company cited the Army’s Base Expeditionary Targeting and Surveillance Sensors-Combined and work on smarter transportation systems as two key growth drivers. Despite the strong quarter, sales for the year came in below guidance due to delays in orders from the Department of Homeland Security (DHS) and international customers. ICx had forecasted 2008 sales between $177M and $184M. The company says the DHS delays are due to the change in administration. Given continued softness in DHS orders and a weak commercial market, which accounts for less than 25% of company sales, ICx is forecasting 14 to 20 percent growth this year to between $196M and $206M, and adjusted earnings before interest, taxes, depreciation and amortization between $2M and $7M. The company will continue to focus on containing costs, says Hans Kobler, chairman and CEO. ICx will likely benefit from the recently approved economic stimulus bill but not until 2010, Kobler says. He sees organic growth next year topping 30%. Kobler says the company is “bullish” on the Obama administration and believes that the stimulus package creates a host of opportunities ranging from higher spending on border security to intelligent transportation systems. The company will also focus on executing on key program wins from 2008 and expanding its international business, which is less than 10% of sales. Kobler says ICx is “knee deep” in development on the Joint Nuclear, Biological, Chemical Reconnaissance Increment II contract it won last fall, which is potentially worth over $700 million in production (TR2, Oct. 15, 2008). ICx is increasing its hiring on the J2 program and is negotiating a leas on an expanded facility, which will enable the company to ramp up work on the project and thereby draw down the development spending faster, Kobler says. While he expects to begin seeing production work under J2 pick up in 2010, there’s a chance for some of that to begin later this year. Funded backlog was up 114% year over year to $94M and unfunded backlog was $508M. Morgan Keegan security analyst Brian Ruttenbur said the quarter was “disappointing” as the top and bottom lines came in below estimates. He’s also concerned with the weaker than expected guidance although he notes that key wins last year and a recent order from South Korea for mass spectroscopy sensor programs bode well for future growth.