Computer Task Group Earnings: Here’s Why Investors are Ambivalent Now

Computer Task Group Inc. (NASDAQ:CTG) delivered a profit and met Wall Street’s expectations, AND came up short on beating the revenue expectation. The revenue miss is a negative sign to shareholders seeking high growth out of the company.

Computer Task Group Inc. Earnings Cheat Sheet

Results: Adjusted Earnings Per Share increased 9.09% to $0.24 in the quarter versus EPS of $0.22 in the year-earlier quarter.

Revenue: Rose 33.67% to $107.12 million from the year-earlier quarter.

Actual vs. Wall St. Expectations: reported adjusted EPS income of $0.24 per share. By that measure, the company missed the mean analyst estimate of $0.24. It missed the average revenue estimate of $112.18 million.

Quoting Management: “CTG’s second quarter earnings were at the mid-point of guidance and up 9%, excluding last year’s non-operational gain, despite lower than expected revenue growth due to a reduction in technical resource requirements from a large customer in our lower margin staffing business and delays in the start-up of EMR projects,” said CTG Chairman and Chief Executive Officer James R. Boldt. “Our focus on higher margin solutions work and the healthcare market is clearly paying off with the operating margin in the quarter reaching 6%, the highest level in over a decade. Healthcare revenue was down slightly from last year as many hospital clients are deferring system investments as a result of the U.S. federal budget sequestration. Long term, we remain optimistic in our healthcare opportunities in EMR and other areas such as post-implementation EMR production support, application management outsourcing, and medical data analytics. Earnings also benefited from work related to our IT medical management solution for chronic diseases. In the quarter, we began an implementation of our medical fraud, waste, and abuse (FWA) software as a service (NASDAQ:SAAS) product for a small payer. While we did not record any revenue from this client in the second quarter of 2013, we expect a meaningful contribution to earnings from this engagement in the second half of the year.”

Key Stats (on next page)…

Revenue increased 33.67% from $80.14 million in the previous quarter. EPS increased 0% from $0.24 in the previous quarter.

Looking Forward: Analysts have a more positive outlook for the company’s next-quarter performance. Over the past three months, the average estimate for next quarter’s earnings has risen from a profit of $0.27 to a profit $0.28. For the current year, the average estimate has moved down from a profit of $1.07 to a profit of $1.06 over the last ninety days.

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(Company fundamentals provided by Xignite Financials. Email any earnings discrepancies to earnings [at] wallstcheatsheet.com)