2HRS2GO: Short covering, outlook push Manugistics back to respectability

2 min read

Manugistics, one of the most erratic technology stocks of the past two years, took off Thursday, surging 11 9/16, or 46 percent, to 36 7/16 after it met analysts' estimates in its first quarter. Analysts are expecting big things from it through the rest of the year.

The maker of supply chain management software still posted a loss of $1.2 million, or 4 cents a share, on sales of $50.5 million.

However, Chief Executive Officer Greg Owens said those money-losing days are over, telling analysts during Wednesday's conference call that the company had already reached the breakeven point for this quarter and expects to be in the black for the foreseeable future.

Manugistics' licensing sales really told the story, surging to $26 million, up 98 percent from the $13.1 million it recorded in the year-ago quarter.

"Our continuing aggressive investments in strengthening and growing our sales organization, in marketing initiatives and in technology innovation are paying off with our license fees growing nearly 100 percent from the same quarter last year," Owens said in the press release.

Analysts are currently expecting Manugistics (Nasdaq: MANU) to break even in its second quarter and earn 15 cents a share in the fiscal year.

Taking a scan at its recent performance, it's easy to see why some investors might be less than giddy about all this euphoria following a $1.2 million loss.

In fact, a bunch of "smart" money was shorting this stock, expecting either a poor or lukewarm earnings report that would have sent the stock sliding back closer to the 9 1/16 it was trading at in October.

Those unfortunate investors who are now scrambling to cover their short positions are at least partly responsible for Thursday's run-up.

Deutsche Banc Alex. Brown analyst Christopher Mortenson congratulated Manugistics for its "great job" in the quarter by upgrading the stock to a "strong buy" recommendation. He also maintains a $45 a share price target.

To its credit, Manurgistics' $50.5 million in sales was a 29 percent improvement from the year-ago quarter when it earned $400,000, or 1 cent a share, on sales of $39.2 million. Not staggering, but steady.

Last quarter, Manugistics beat the Street estimate when it posted a loss of $1.1 million, or 4 cents a share, on sales of $43.7 million.

Those who believe in Manugistics' long-term potential should note that Mortenson also asked about a "huge" government deal in the works, one that could considerably pad its sales and earnings in future quarters.

Owens downplayed this possibility, saying the company wasn't counting on the deal and that it was "gravy when it comes in." He said the selection process should be completed in the next few weeks.

Until then, investors have to decide if this really is the beginning of consistent, sustainable earnings for Manugistics or just another mirage.