(By Rich Bieglmeier) Electro Rent Corp. (ELRC)is expectedto report earnings on Monday, October 1, 2012. Wall Street anticipates that ELRC will earn $0.24 for the quarter. iStock expects the company that rents, leases, and sells new and used electronic test and measurement equipment will report earnings that will exceed Wall Street's consensus number. We figure they will report closer to 26 cents – a 2 cents upside surprise.
Electro was recently recognized for its "strong revenue and earnings per share growth and three-year total annualized return" by Fortune in the magazine's 2012 list of the "100 Fastest-Growing Companies."
Surprisingly, this thinly traded company has missed estimates more frequently than it's topped the Street's consensus outlook; yet, shares have added to their price in 11 of the last 16 quarterly checkups, and nine of the last 12.
The average price move in the days surrounding earnings for 11 winning periods is 4.33 percent. For the five less happy announcements for shareholders, the stock dropped 6.06 percent.
Electro Rent's stock chart shows a narrowing, ascending channel. Typically, when the range from top to bottom shrinks while a stock trends higher, it is a sign of indecision. In this case, Wall Street is probably waiting for Monday's expected quarterly checkup before taking the price higher or lower.
With a plus announcement and bullish guidance from management, we can see ELRC tracking higher, maybe even testing its 52-week high of $19.35. A swing and a miss and shares could fall to the 50-day average near $17.20.
Rise or fall, income seeking stock investors might like ELRC's current dividend yield of 4.40 percent annually. In our search through the small-cap renting and leasing company's financials, iStock didn't see anything to make us believe the current 20 cent dividend is at risk. Additionally, our run through the numbers didn't reveal any red-flags heading into earnings.
Overall, we think Electro Rent is a little expensive relative to its peer group. But what else would you expect from one of the "100 Fastest-Growing Companies?" It trades with a premium P/E of 16.50 versus the industry's 12.03, and ELRC is valued at 1.74 times sales. Meanwhile, peers trade with a price-to-sales ratio of 1.05.
Despite the stock price's history of rewarding investors, iStock would suggest waiting to see what happens on Monday, especially in a weak market. If the stock shaves some off the top, income seekers could end up with a yield closer to 5 percent.