TPS Position Update – July 26, 2016
. . . . LRAD CORP (LRAD) – HOLD
We recommended the stock in March at $1.74. Today, it closed at $1.96.
LRAD is a big fish in a small, but growing pond. It is a top manufacturer of acoustic hailing devices, known as AHDs, and advanced mass notification systems. These are specialized audio systems used by law enforcement agencies and the military.
Q1 was not good. Revenues were $3.6 million, down from $4.5 million for Q1 2015. The company attributes this to “the timing of customer orders and shipments.”
LRAD’s net loss for the quarter was $665,000, compared to a $291,000 profit for Q1 2015.
Are we worried? It’s not as bad as it looks. There is still no long-term debt creeping onto the balance sheet. Throttling Q1 performance… there were one-time, non-recurring expenses involving an $836,000 payment to settle a lawsuit and for severance costs involving the CEO.
On the positive side of the ledger, the Company reported a $547,000 income tax benefit to partially offset the loss.
So it hasn’t exactly been smooth sailing for LRAD lately. We see better times ahead, with more business coming in like the recent $607,000 deal for systems being sold to Latin American and Asian buyers.
This is one of our stocks that pays a modest dividend. When Q1 earnings were released, a one-cent per share dividend was announced.
. . . . ABRAXAS PETROLEUM (AXAS) – HOLD
We recommended Abraxas at $1.34 in May. Today, AXAS closed at $1.15.
The San Antonio-based energy company is engaged in crude oil and natural gas exploration and production across the Rocky Mountains, in the Permian Basin and onshore Gulf Coast regions.
We like the company today just as much as we did when we bought the stock. It is actively developing new projects, and recently decided to work solo on a Texas project instead of bringing in a joint venture partner… good news for stockholders when the Austin Chalk well starts producing.
The Austin Chalk project puts an end to a 16th month long drilling drought for Abraxas. Preparations for drilling began late in the spring and production should start in the fall.
This year, we expect the company to invest as much as $40 million in capital projects like the Austin Chalk well near Pleasanton, Texas. That’s up from the budgeted $25 million.
Q2 earnings will be released August 10th. We are not expecting any surprises, good or bad. Industry observers think that quarterly losses could be cut by 20%. But we are more focused on 2017 and beyond.
Action To Take
- HOLD LRAD CORP (LRAD)
- HOLD ABRAXAS PETROLEUM (AXAS)
Category: TPS Update
