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IDT falls short of 2Q forecasts

IDT Corp. (Nasdaq: IDTC) missed analyst consensus estimates by two cents in the second quarter.

After market close Thursday, the communications provider reported fiscal second quarter net income of $1.5 million, or 4 cents per share, excluding one-time events. First Call's survey of six analysts predicted a profit of 6 cents per share for the quarter ended Jan. 31. Zack's Investment Research polled three analysts to produce the same consensus figure, with per-share estimates ranging from 5 cents to 8 cents.

The stock price of IDT fell to 31 15/16 in afterhours activity on the Island electronic communications network, immediately following the earnings report. Shares closed Thursday's regular trading at 33 1/2, down 1/2 for the session.

Non-recurring items included $107.3 million in gains from the sale of 2.2 million shares of Internet telephony specialist Net2Phone (Nasdaq: NTOP), which held a secondary offering in December. IDT also recorded a one-time charge of $3 million related to the early retirement of a bank loan. Including all extraordinary items, IDT earned $105.7 million, or $2.90 per share.

Second quarter revenue totaled $271.5 million, a 77 percent gain from the year-ago period.

IDT's core telecom business $268.4 million in revenue and $16.8 million in earnings before interest, taxes, depreciation and amortization. Wholesale revenue from carrying traffic between telecom carriers rose to $132.4 million, representing a 9.1 percent sequentially when the first quarter's non-recurring wholesale revenue is discounted. Retail revenue increased 4 percent sequentially to $136 million, including $127.1 million in revenue from prepaid calling cards.

Gross margins for telecom rose to 18.1 percent, compared to 16.9 percent in the first quarter.

"The improved margins experienced by our telecommunications business this quarter reflect the investments we’ve made in our network," said Jim Courter, IDT's vice chairman and president. "Our plans to further enhance our network, with significant additional investment, will allow us to continue to grow our telecom minutes while improving overall profitability."

The company's Internet business reported a second quarter operating loss of $3.6 million on revenue of $3.2 million. Internet revenue fell 15 percent sequentially and 27 percent year-over-year.

The venture arm of IDT saw an operating loss of $3 million because of start-up and development costs.

IDT ended the second quarter with cash of $89.3 million. The company's stock holdings include $1.55 billion in shares of Net2Phone and Terra Networks (Nasdaq: TRRA), a Spanish- and Portuguese-language ISP and portal operator with whom IDT formed a joint venture to target the U.S. Hispanic market.

"It has been a quarter that has dramatically improved our balance sheet," Courter said during a Thursday afternoon conference call with analysts and investors. "From the standpoint of our equity positions, from the standpoint of cash, this is a far different company than it was last quarter."

On the advice of counsel, IDT did not take questions during the conference call. CEO Howard Jonas did not speak during the call, with the company citing laryngitis as the reason.

According to Zack's Investment Research, two analysts recommend IDT as a "strong buy", two brokerage firms rate the stock a "moderate buy", two maintain the equivalent of "hold" advisories, and one has a "strong sell" rating.

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