Napco Security Technologies (NSSC $3.05) reported lower than expected Q1 (September) results. Earnings were unchanged from the year ago period at a $.01 a share loss. Sales declined by 6% to $15.2 million. The entire $1.0 million slide was accounted for by inventory reductions at the company's home security dealers and commercial re-sellers. Napco's high potential digital products were re-engineered in the period to reflect consumer feedback. Those didn't sell as well as anticipated but they did expand year to year. The digital products continue to hold explosive long term potential. Sales to the cable companies and other "triple play" suppliers still haven't gotten off the ground. Those companies are wrangling with other issues at present. They are beginning to list home security products in their overall product catalogs, though. Once active marketing starts a major acceleration could arise.
Hurricane Sandy might impact performance in the December quarter. Volume was poised to rebound. But the rebuilding effort might cause some security projects to be postponed as other work receives greater attention. Napco's largest market is the Northeast.
Due to the headwinds we have reduced out fiscal 2013 (June) sales estimate to $75 million. We also have lowered our earnings target by a nickel to $.25 a share. The long term outlook remains bright. Napco is well positioned to capture a leading role in the digital security industry.
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