Updated from 10:47 a.m. EDT
traded up almost 11% after it raised third-quarter and full-year earnings and revenue estimates as mobile-phone handset shipments to China are expected to be higher than previously thought.
The stock, which closed in regular trading Thursday at $34.26, up $2.35, or 7.36%, has risen more than 50% for the year.
The company now says that it will ship 500,000 more handsets to China to support subscribers to its PAS system and will earn about 45 cents a share on revenue of $580 million compared with previous guidance of 42 cents a share on revenue of about $500 million. For the year, the company expects to earn $1.60 per share on revenue of $1.93 billion, compared with the previous estimate of $1.55 a share on revenue of $1.83 billion. It also promised quarterly positive cash flow and an increase in inventory turns -- the measure of how fast a company can deplete its inventory.
Unlike many of it competitors, Alameda, Calif.-based UTStarcom seems to have found a way to get over the great wall and successfully sell to China Telecom and China Netcom. It has found success in selling the PAS system, which the company claims allows for easy deployment of wireless networks on top of an existing public-switched telephone network, creating an instant market for wireless services in areas where it is difficult and expensive to set up new copper lines. By the end of this month, the company expects that its Chinese phone networking customers will have signed up over 16 million subscribers to its systems.
While investors clearly rallied around the stock, they might wonder about the company's inability to get its guidance right. This is the second time this year that the company has raised its interim earnings and revenue estimates, and in the current release teased that it is withholding guidance on 2004 until its formal earnings announcement on Oct. 23. The company said it continues to believe that long-term earnings growth will be 20%-25%.