Bear of the Day: IEC Electronics (IEC)
Weak results and a cloudy earnings outlook have led to downward estimates revisions, sending this electronics company to a Zacks Rank # 5 (Strong Sell).
About the Company
IEC Electronics Corporation (IEC) is a provider of electronic manufacturing services to technology companies in the military and aerospace, medical, industrial and communications sectors. The Company primarily manufactures complex circuit cards, system level assemblies, custom cable and wire harness assemblies and precision sheet metal products. ,
Restatement of Accounts
On May 1, 2013, the company shocked its investors by announcing that it will restate its results for the fiscal year ended September 30, 2012 and quarterly results for that year as well for the quarter ended December 28, 2012.
The restatement was reportedly required due to an accounting error which resulted in an aggregate overstatement of gross profits by approximately $2.2 million.
Disappointing Results
On May 20, 2013, IEC announced preliminary estimated results for the quarter ended March 29, 2013 and said that it anticipates completing the process of restatement and filing of it second quarter 10 Q with 45 days.
Thereafter on July 3, 2012, the company filed its restated financial statement and the quarterly results for Q2 with the SEC.
Second quarter resulted in a loss of $0.12 per share, substantially worse than the Zacks consensus estimate of earnings of $0.20 per share. In fact, the company has delivered negative earnings surprises in three out of last four quarters, with an average quarterly surprise of 59.1%.
NYSE Delisting Notice and Regaining Compliance
On May 20, the company received a delisting notice from the NYSE due to its failure to timely file its quarterly report with the SEC. However the issue was later resolved and the company regained compliance with the listing requirements on July 9, 2013.
Investor Class Action Lawsuit
A class action lawsuit has been filed on behalf of all purchasers of IEC securities between February 8, 2013 and May 21, 2013. The Complaint alleges that the Company issued false and/or misleading financial statements during this period. Several law firms are currently investigating the company.
Downwards Revisions
Due to disappointing results and lack of earnings visibility, quarterly and annual estimates have been revised sharply downwards in the past few weeks. Zacks consensus estimates for the current quarter and year are now $0.11 and $0.23 per share respectively, down from $0.20 and $0.60 per share, 30 days ago.
The Bottom Line
IEC is currently Zacks Rank # 5 (Strong Sell) stock and it has a longer-term recommendation of “Underperform”. Further as the company is currently stuck in accounting and legal mess, it is best for investors to avoid this stock for the time being.
Better Play?
Investors looking for exposure to the industry (Electronics-Misc components) could look at Nidec Corp ADR (NJ); which is a Zacks rank#1 (Buy) stock, with an “Outperform’ recommendation.
Want the latest recommendations from Zacks Investment Research? Today, you can download7 Best Stocks for the Next 30 Days.Click to get this free report >>
IEC ELECTRS NEW (IEC): Free Stock Analysis Report
More From Zacks.com