EPS Outperformer Should Set New High Today

In a recent edition of The Goldman Guide we mentioned that trading on news will remain one way to ‘seek alpha’ in the market this summer.  Another earnings season is upon us, driving upward momentum in stocks that beat Street estimates, such as today's profiled stock, which should set a new high today.

Yesterday, after the market closed, Franklin Covey Company (NYSE – FC - $14.50) announced 3Q13 earnings.  The news was awesome, so look for a nice pop in the short-term.  Revenue for 3Q13 was $44.9 million actual versus $43.3 estimate, and EPS was $0.13 per share versus the $0.12 estimate for the same period.  Revenue was up over 11% from last quarter and EPS was up from $0.08 per share from last quarter as well.

Franklin Covey is somewhat of a corporate America ‘household’ name with the Franklin Planner products, something you would be familiar with if you entered the workforce sometime before the late 1990’s and the advent of scheduling systems on web-based and other software solutions.  The Company has kept with the times, so to speak, and offers a wide variety of products to address leadership, execution, productivity, trust, customer loyalty, sales performance, and education problems worldwide. FC also offers clients training in management skills, relationship skills, and individual effectiveness, as well as personal-effectiveness literature and electronic educational solutions. In addition, it sells a suite of individual-effectiveness and leadership-development training products; and books, e-books, audio media, downloadable and paper-based tools, content-rich software applications for smart phones and other handheld devices, training accessories, and other related products.

Recently, FC landed two major deals for its The Leader in Me and The 7 Habits of Highly Effective People products in China and the Netherlands.  These deals should provide an additional revenue stream for the Company.

The charts indicate a bullish signal for the short-term including a very bullish signal on the favorite EMA.  With earnings forecast at $0.62 and $0.88 per share for 2013 and 2014 respectively, a shift in P/E makes the stock attractive as the trailing 12-month P/E is 29.1 moves to a forward 12-month P/E of 16.4 from a valuation standpoint.  We think a price target of $18 over the next few months is a strong possibility.

Have a great day.

Disclosure: Goldman Small Cap Research analysts are neither long nor short these shares but may elect to purchase the stock within the next 48 hours.

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