Procera Networks Inc.
) has beaten the Zacks Consensus Estimate in five of the past six
quarters, amassing an average surprise of 97.2% over the last four.
The most recent beat in its third quarter has led most analysts to
raise their earnings expectations in the past 7 days. As a result,
this provider of intelligent policy enforcement solutions achieved
Zacks #1 Rank (Strong Buy) status on November 9. Moreover, its
long-term projected growth rate of 26.3% makes it a solid growth
Impressive Third Quarter
On November 6, Procera Networks reported third quarter earnings of
14 cents per share, which was flat on a year-over-year basis while
trouncing the Zacks Consensus Estimate by 55.6%. The impressive
results were primarily driven by improving top-line growth in the
Revenue jumped 31.7% from the comparable prior-year quarter to
$16.1 million, in line with the Zacks Consensus Estimate. The
better-than-expected growth was driven by solid performances from
product sales (up 27.8%) and services (up 50.8%). Mobile customers
contributed 45% of total revenue. New customers contributed 57% of
the total revenue while the remaining came from follow-on orders.
Operating profit surged 27% year over year to $2.6 million.
However, the operating margin pulled back 60 basis points ("bps")
to 16.4%, primarily due to higher operating expenses (up 64.8% year
During the quarter, Procera added 11 new customers across its
operating segments that included cable (22% of total revenue),
fixed (17% of total revenue) and mobile. The company also received
five additional orders from existing Tier 1 customers. Customer
awards for higher education (16% of total revenue) reached 50
during the quarter.
Procera continues to expect 40% revenue growth year over year to
reach $62.0 million by the end of fiscal 2012.
Earnings Estimates Move Higher The past 7 days have seen a number
of positive estimate revisions for this year and next. The Zacks
Consensus Estimate for 2012 is up nearly 14.3% in that time to 40
cents per share, as 5 of 6 estimates got a boost. The Zacks
Consensus Estimate for 2013 is at 57 cents, up 3.6% in the past
week as half of the 6 estimates advanced.
Currently, Procera is trading at a premium to most of its peers
based on P/E, P/S and P/B. Its strong earnings growth expectation
of 26.3% over the next five years compares favorably with the
industry average of 10%, indicating room for further expansion.
Historically, share prices have shown positive correlation to
earnings growth. The uptrend in the 2012 earnings estimate should
encourage investors as the stock is likely to follow the trend.
Fremont, California-based Procera develops Intelligent Policy
Enforcement solutions based on Deep Packet Inspection technology,
which helps network operators to improve the quality and longevity
of their networks. Its solutions also help in solving security
hazards. Procera faces stiff competition from the likes of Brocade
Communications Systems Inc. (
), Cisco Systems (
) and Juniper Networks Inc (
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