Sykes Enterprises' Shares Popped: What You Need to Know

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Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of customer contacts specialist Sykes Enterprises (NAS: SYKE) connected with Mr. Market today, rising as much as 17.6% in heavy early morning action.

So what: Last night's third-quarter report was a very mixed bag with reported earnings and next-year earnings guidance far above estimates, but less impressive revenue figures. The bottom-line windfalls come partly from Chinese tax refunds and an insurance claim filed in 2009, but cost-cutting efforts made a far greater impact on earnings.

Now what: Sykes has taken the foot off the revenue accelerator to focus on widening margins lately, leading to terrific earnings growth. If you allow me to jump across industries for a bit, this is reminiscent of how Dell (NAS: DELL) is switching from high-volume but thin-margin consumer systems to lower-volume but more profitable servers, or what would happen if Costco (NAS: COST) decided to raise prices and take a hit to its sales growth. I think it's a smart move, assuming that company doesn't need high sales volumes just to stay liquid -- which Sykes and its terrific balance sheet don't.

Interested in more info about Sykes Enterprises? Click here to add it to My Watchlist.

At the time this article was published Fool contributor Anders Bylund holds no position in any of the companies mentioned. The Motley Fool owns shares of Costco Wholesale. Motley Fool newsletter services have recommended buying shares of Costco Wholesale and Dell. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinion, but we all believe that considering a diverse range of insights makes us better investors. Check out Anders' holdings and bio, or follow him on Twitter and Google+. We have a disclosure policy.

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