Going underwater may be a good thing in this market
Today's Financial News - Posted March 5, 2009
There is plenty of bad news to focus on today, but it is much more fun to look at a company that is doing well. Orion Marine Group (NASDAQ:OMGI) is one of those companies.
By Andrew Snyder, TodaysFinancialNews.com
Baltimore – (TFN): It is downright depressing. All across the country, investors are tossing their hands in the air and walking away. As the S&P 500 sinks below the 685 level, it is tough not to join them. Fortunately, there are still some savvy investors making money in this market.
Instead of dissecting the reams of negative news hitting the Street today, let’s look at one of the best performers of the day, and the year for the matter.
Thanks to its latest earnings report, Orion Marine Group (NASDAQ:OMGI) is up by more than 15% so far today. Imagine what it could be doing if all three major indices were not down by over 2.5%.
The company specializes in marine contracting. It is the kind of contractor ports and infrastructure engineers call when they need some heavy work done above or below the water. It can do bridge work, lay pipes, build cargo container facilities, you name it.
Orion is at the heart of an industry that has been ready to explode for over a decade.
Lighting the fuse
The positive share price action comes thanks to the news the company healthily beat Wall Street’s earnings expectations. After rubbing their crystal balls, analysts predicted Q4 earnings of $0.20 per share. The company surprised them with actual earnings of $0.25 per share, 25% higher than predicted.
Even more spectacular than the surprising earnings figure was that the company was able to record its largest quarterly revenue figure in its 14-year history, $79.2 million. That is quite an accomplishment given the current economic environment.
If you have following the markets closely, I hope there is one very important question on your mind.
The past is the past. What about the future? A lot of companies have managed a strong fourth quarter, but got hammered when they were forced to lower their profit forecasts.
Fortunately, Orion has an answer for all the folks questioning its growth. Corporate executives merely point to the company’s $180 million backlog the company expects to liquidate this year.
When so many other companies are begging for business, Orion already has it lined up. Now all investors can hope for is that the orders are not cancelled or pushed back. Obama’s stimulus plan may help avoid a worst-case scenario in that department.
Overall, the company tells investors to expect annual growth in the range of 12% to 16% for the current fiscal year. Not bad considering the overall economy is contracting by over 6% at the moment.
The major variable in this company’s success is the sustainability of its order book. If its leaders are wrong and the anticipated backlog is not liquidated this year, the company is in for rough times. All it will take is one or two of its contracts to be cancelled or scaled back and quarterly estimates will plunge. That will be a blow to shareholders getting in at today’s prices.
Orion is a good company and worth your investment dollars, but buy only on dips. Today’s prices are overly optimistic.
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