Over the weekend, I listened to EFJ's 4th quarter and Fiscal 2006 earnings call, in hopes of gaining insight as to why the stock lost over $1 between 03/06/2007 and 03/08/2007. As expected, the conference call revealed a few leaks in forward sales and earnings estimates for EFJ, Inc in 2007.
Thoughts on the Conference Call
- Annual sales growth for Transcrypt International flat lined. When a caller asked about future sales prospects, CEO Michael Jalbert responded, “we're working on it.”
- 2006 Backlogs were at the highest level ever in company history, but this didn't stop Wall Street from hammering the stock by 16% after the earnings call was released. Due to the 63% institutional ownership of EFJI shares, I believe institutional investors were as worried about the earnings call as I was.
- The level of uncertainty among EFJ's corporate management was unusually high in this conference call. Perhaps management is withholding pertinent information in regards to future sales and growth outlooks. When a caller asked about quarterly numbers, Michael Jalbert denied his request because he was worried about eavesdropping competitors. Yes, the competition is always listening, but what's the difference between quarterly numbers and fiscal numbers? Just a mere division of 4.
Such cavalier responses really worry me as an investor in EFJ.
Conference Calls are important pieces of your investment research
Although I'm long on shares of EFJI, I still have to keep up with the company's current numbers and future goals. That is why listening to earnings conference calls is such an important part of my investment research. How else could I feel out management without directly phoning the CEO and CFO themselves?
The most interesting segment is when individual and institutional investors put management on the hot seat with their respective questions. During the question and answer session between management and callers, there is no place to hide. If management is unsure about the company's future, anyone listening to the conference call will pick up on their lack of foresight. That's why I highly recommend listening to each conference call for every stock you hold.
Can't stand to sit through the conference call? Then make sure to read the earnings call transcript online. SeekingAlpha lists a bunch of conference call transcripts for individual stock holders to sift through.
Note: I own shares of EFJI.
Tarik Pierce is the founder of InvestorTrip.com and regularly contributes articles to this website.
While living overseas, he uses PureVPN for a low cost VPN service.
He recommends Bluehost for setting up your own personal and/or business blog.
While his background is mostly related to trading stocks, he recently gained interest in real estate crowdfunding with Fundrise.