Wednesday, May 16, 2012

Napco Security Technologies ( Nasdaq - NSSC ) -- Economic Headwinds

Napco Security Technologies (NSSC $2.85) reported lower than expected Q3 (March) results.  Sales declined 3% to $17.2 million.  Earnings were unchanged year to year at $.03 a share.  Home security demand remained muted despite the introduction of several high tech products due to continued weakness in discretionary consumer spending.  That segment did post a 5% gain but a stronger performance was anticipated as a result of the new product launches.  Locking system sales to the commercial market remained slow and declined by approximately 20%.  Napco has developed a series of new locks aimed at the refurbishment segment, which promises to give that segment a lift in upcoming periods.  Up to now the company has relied almost completely on new construction.  That area has started to show improvement, which could yield further leverage in upcoming quarters.

The new computer based home security products are gaining popularity.  Additional features and upgrades are in the pipeline.  The technology is likely to dominate the industry over the long haul.  For now, though, most sales are being made to new installations.  Upgrade sales to existing customers have been relatively modest.  And even in the new user market sales have been less dynamic than they might have been under better economic conditions.  Still, volume is likely to expand.  And margins promise to widen on any increase in activity.

( Click on Table to Enlarge )


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