We recently reiterated our Neutral recommendation on MICROS Systems Inc (MCRS). Earnings estimates for fiscal 2011 have inched up by $0.03 following the release of better-than-expected first quarter results.
MICROS Systems reported revenues of $233.4 million in the first quarter of fiscal 2011, up 10.4% year over year. The increase in revenues was primarily driven by growth in demand from customers resulting in an improvement in global economic conditions.
On a segmental basis, Hardware generated revenues of $44.3 million, up 2.2% year over year. Software revenues were $27.9 million, up 12.9% year over year. Service revenues came in at $161.3 million, up 12.5% year over year, attributable to the company’s acquisition of TIG Global, LLC (TIG Global) in December 2009 and expansion of customer base.
Net income jumped 30.9% year over year to $31.6 million. EPS for the quarter was $0.39 compared with $0.30 in the year-ago quarter, easily beating the Zacks Consensus Estimate of $0.34.
MICROS Systems reiterated its previously provided guidance. The company expects sales at around $1.0 billion and net income in the range of $140 million and $142 million.
Business of MICROS Systems was adversely affected by the global recession. Weakened consumer spending and difficulties in obtaining credit discouraged customers from acquiring or opening new hospitality and retail venues. Customers were also reluctant to make significant capital expenditures for new systems and system upgrades.
Nevertheless, MICROS Systems recently indicated a modest improvement in demand as compared with the previous year, as the economy recovered. In particular, the hotel and restaurant business is expected to be really strong, as customers who had earlier delayed rollouts resume with growth in demand. The services sales volume continues to increase driven by the expansion of the customer base along with an increase in recurring support revenue from existing customers (primarily through purchase of additional services).
Five out of eight analysts covering the stock have raised their estimates for fiscal 2011 after the first quarter results, signifying a strong positive sentiment. For fiscal 2012, earnings estimates have gone up by $0.07 as two out of the seven analysts covering the stock increased their estimates while one analyst moved in the opposite direction.
However, we believe that shares are fairly valued as of now, and therefore, maintain a Neutral recommendation. Our recommendation is supported by a Zacks # 3 Rank, which translated into a short-term rating of Hold.
MICROS SYS (MCRS): Free Stock Analysis Report
Zacks Investment Research
