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Pacific Gateway&#039s 1Q earnings a penny short of forecasts

Pacific Gateway Inc. (Nasdaq: PGEX) saw revenues rise 34 percent as the company rang up first quarter earnings that were a penny short of First Call's consensus estimate.

In first quarter results released after market close Thursday, the data and telecommunications carrier reported net income of $4.2 million, or 22 cents a share. First Call's survey of 11 analysts predicted earnings of 23 cents a share.

First quarter revenue of $141 million represent a 34 percent gain year-over-year, and 11 percent increase sequentially. International traffic rose 47 percent from the first quarter of last year, and 11 percent from the fourth quarter.

The company, which connects telecommunications carriers, said it plans to keep spending to build up its fiberoptic network for broadband tranmission. "We expect to accelerate growth as we roll out our aggressive expansion plans into the Internet and U.S. and offshore retail markets," Howard A. Neckowitz, president and CEO of Pacific Gateway.

About 30 percent, or 30 cents a share, of bandwidth sales will be spent on capital investment over the next two quarters, Neckowitz said. The company also wants to use its wholesale business to subsidize its move into the high-end retail market for telecom services. "Our offshore facilities, switches, and licenses continue to provide us with high gross margin opportunities and give us the base for adding retail distribution," Neckowitz said.

Shares of Pacific Gateway rose 3/16 to 36 5/16 in Thursday's trading prior to the earnings report. Among a dozen analysts surveyed by Zack's Investment Research, seven maintain the equivalent of a "hold" rating on Pacific Gateway, two have "moderate buy" advisories, and three rate the stock a "strong buy".>

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