Polycom Takes the Bad with the Good (PLCM)

Earnings season can be a confusing time of year as investors and traders try deciphering when good is bad or bad is good. Did the company increase revenues and miss the bottom line, or does it all really matter as long as the results and forward guidance beat the expectations of analysts? On Tuesday afternoon, Polycom (NASDAQ: PLCM) announced financial results from the third quarter. In year-over-year comparisons, the company showed revenues declining by 6% to $335 million and the earnings per share fell from $0.23 to $.10. Including restructuring costs and acquisition expenses, the company actually experienced a loss of $0.08. The results, however, beat the forecasts of Wall Street analysts looking for $331 million in revenues and earnings of $0.08 per share.

Eric Brown, COO and CFO for Polycom, noted in a conference call following the earnings report that the fourth quarter is important for the company with the release of new products. Chief Executive Officer Andrew Miller added, “Demand for our best unified communication and collaboration solutions was solid in Q3.”

Analysts expect the communications solutions company to earn $0.16 per share in the December-ending quarter on revenues of $358 million.

Traders appeared to celebrate the part about beating the expectations of analysts as buy orders filled the morning air. On the opening bell, the stock gapped $1.10 higher to start the trading day at $10.36. Within the first 30 minutes of the session, share prices tacked on an additional 81 cents to trade at a daily high of $11.17. By the lunch hour on the east coast, the stock peeled off some of the morning gains. In the final hour of the trading day and on light volume, the stock dove to an intraday low of $10.06 before bouncing a bit as the closing bell sounded. Shares of Polycom finished the session with a gain of nearly 10% to end the day up 90 cents at $10.16. Traders kept busy trading 8.3 million shares compared to an average day when 2.7 million shares exchange hands.

Since hitting an annual high in February when the stock traded for $22.34, the road for Polycom shares and investors has been rather rocky. In April, the company told investors that first-quarter earnings would fall below the expectations of analysts. The news caused share prices to plummet by 12% in one day. The selling did not let up until late July when the stock traded for $7.45, a new 52-week low. Share prices managed to rebound nearly 50% from the low point until mid-September. After watching the stock decline 66% over a period of five months, traders have to wonder if the action today marks an end to what has so far been a dismal year for Polycom share prices.

All but one of the 19 analysts following the company has a “hold” rating on the stock. The consensus price target for the stock is $10.38.

Polycom provides unified communications solutions plus video, voice and infrastructure solutions. Polycom RealPresence allows people in different locations to collaborate face to face. The company is located in San Jose, California, and was founded in 1990.

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Published by Alan Masterson

Alan has over 25 years of trading experience in the U.S. equity markets. He began his career in finance working on a program trading desk specializing in over-the-counter stocks. His career progressed from that point to his current position as senior trader on an institutional trading desk. In the evenings, Alan teaches economics at a local community college. He has contributed articles to various publications over the last six years, including feature articles for an economics magazine and various financial blogs. You may contact Alan via his email (alanmasterson@wallstreetpr.com) or his Google+ page (https://plus.google.com/103338576216002376250).