Manugistics Meets Earnings, Says '02 Will Be OK

Updated from 5:18 PM ET

Supply-chain software makerManugistics(MANU Quote - Cramer on MANU - Stock Picks) reported Monday that it met consensus earnings projections and beat revenue estimates for its fiscal fourth quarter, ended Feb. 29. The Rockville, Md.-based company laughed in the face of the sourpuss economy by reaffirming previous guidance for fiscal 2002, citing "robust demand" for its products.

Manugistics earned 5 cents a share on revenue of $89.3 million, matching analysts' earnings expectations and exceeding their estimates of $80.9 million in revenue for the quarter, according to Multex.com. For the full fiscal year, the software maker pulled in 14 cents a share on $286 million in revenue. Revenue increased 76% from $152.4 million the year earlier. Analysts expected 10 cents a share on revenue of $259.6 million, according to Multex.com.

The company said it expects to earn 3 cents a share in its fiscal first quarter, ending June 30. It repeated its estimates of earnings per share of 26 to 27 cents for fiscal 2002 and revenue growth of more than 50%.

"We never saw customers go away and we haven't seen a slowdown," chief executive Greg Owens told analysts and investors during the conference that immediately followed the announcement. "The marketplace is still willing to buy," he added.

During the quarter, Manugistics signed deals with DaimlerChrysler AG (DCX Quote - Cramer on DCX - Stock Picks) , Johnson & Johnson(JNJ Quote - Cramer on JNJ - Stock Picks) and Vodafone Group Plc (VOD Quote - Cramer on VOD - Stock Picks), bringing its total number of customers worldwide to 1,100. Owens also said that, unlike many other tech companies, his had plenty of business in the last three weeks, and that "some deals even slipped into next quarter."

Supply-chain software, complex computer programs that help companies manufacture and manage their inventories more efficiently, is in high demand right now. It holds a lot of promise for helping businesses squeeze excess costs out of their supply chains. However, the limitations of that kind of software have also come to light recently, when Nike(NKE Quote - Cramer on NKE - Stock Picks) blamed a profit shortfall on problems with Manugistics' competitor I2 Technologies' (ITWO Quote - Cramer on ITWO - Stock Picks) software.

So far, investors seem willing to pay a premium for one of the few companies able to navigate the turbulent economy. But how long will that last? The stock, which trades at 103 times next year's earnings, is still enjoying near bubble-era valuation. I2, by comparison, has come down from its soaring heights, and now trades at a more reasonable -- but still not cheap -- 46 times next year's earnings. But were Monday's results enough to keeps its shares from feeling pressure if investors become more skittish on technology shares?

"I'm not going to tell you Manugistics (stock) is cheap, but it has stepped up and delivered in a tough market," said U.S. Bancorp Piper Jaffray analyst Tim Klein, who rates the stock a buy. (His firm hasn't done underwriting for the company.)

"People who share the company's confidence that it will perform well even given the current market conditions will be OK with the valuation. People who think Manugistics may get blindsided, won't. I tend to be a little more cautious," added Klein.

With a confidence that is starting to become the company's hallmark, it reiterated guidance for its February quarter just days after it closed it. Monday, it did the same for 2002. That healthy outlook flies directly in the face of software giant Oracle's(ORCL Quote - Cramer on ORCL - Stock Picks) recent revenue and profit warning.

"Manugistics is super well positioned in one of the greatest spaces of all time," says Bert Hochfeld, an analyst with Josephthal who rates the stock a buy. "Sure, [CEO] Greg Owens is a promotional guy, and he's going to say all the right things -- we know that. But many of them also happen to be true." (Hochfeld's firm hasn't done underwriting for the company.)

One thing Manugistics has going for it, in comparison to competitors like i2, is its relative size. With the slowdown in technology spending causing deals to be delayed -- a la Oracle -- analysts say Manugistics' products are somewhat cheaper, and therefore, less threatened by the newfound frugality that's gripping corporate America.

Nonetheless, that line of thinking -- that the cheap can survive -- can only remain intact for so long. If the economy worsens, and spending slows even more, it's unlikely that any company can remain immune.

Indeed, referring its ability to deliver money-saving products at a more reasonable price than competitors, Owens said, "IT budgets do not get cut across the board. Certain projects get funding and others don't."