Neutral Tandem Earnings Preview

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Neutral Tandem (NAS: TNDM) came in under analyst's estimates last quarter, but now have a chance to fix things this quarter. The company will unveil its latest earnings on Tuesday, Nov. 8. Neutral Tandem provides tandem interconnection services principally to competitive carriers, including wireless, wireline, cable and broadband telephone companies.

What analysts say:

  • Buy, sell, or hold?: Analysts think investors should stand pat on Neutral Tandem with eight of 11 analysts rating it hold. Analysts don't like Neutral Tandem as much as competitor Consolidated Communications Holdings overall. Two out of four analysts rate Consolidated Communications Holdings a buy compared to three of 11 for Neutral Tandem. That rating hasn't budged in three months as analysts have remained steadfast in their opinion of the stock.
  • Revenue Forecasts: On average, analysts predict $66.6 million in revenue this quarter. That would represent a rise of 43.3% from the year-ago quarter.
  • Wall Street Earnings Expectations: The average analyst estimate is earnings of $0.24 per share. Estimates range from $0.21 to $0.26.

What our community says:
CAPS All-Stars are solidly backing the stock with 98.3% granting it an "outperform" rating. The community at large backs the All-Stars with 97.8% assigning it a rating of "outperform." Fools are keen on Neutral Tandem and haven't been shy with their opinions lately, logging 342 posts in the past 30 days. Neutral Tandem has a bullish CAPS rating of five out of five stars that is about on par with the Fool community assessment.

Management:
Neutral Tandem's income has fallen year over year by an average of 19.1% over the past five quarters. Revenue has now gone up for three straight quarters. The company's gross margin shrank by 7.8 percentage points in the last quarter. Revenue rose 45.4% while cost of sales rose 80.1% to $26.3 million from a year earlier.

Now let's look at how efficient management is at running the business. Traditionally, margins represent the efficiency with which companies capture portions of sales dollars. The following table shows gross, operating, and net margins over the past four quarters.

Quarter

Q2

Q1

Q4

Q3

Gross Margin

59.7%

61.1%

62.3%

65.3%

Operating Margin

19.4%

16.1%

21.1%

28.7%

Net Margin

10.8%

12.3%

9.5%

20.6%

For all our Neutral Tandem-specific analysis, including earnings and beyond, add Neutral Tandem to My Watchlist.

At the time this article was published The Motley Fool owns shares of Neutral Tandem.Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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