Tag - SXE

Much like a fine wine, Stanley, Inc.’s (NYSE:SXE) results are purported to become better with age. Bolstered by a rock-solid backlog, a synergistic acquisition and continued organic growth, the provider of IT services to U.S. defense and federal civilian government agencies has a strong outlook.

Stanley’s backlog is robust with 90% of forecasted revenues already in the books. Continued support for the Space and Naval Warfare Systems Center in Charleston, S.C. is one of the company’s latest and largest contracts that could translate to $249.88 million in proceeds should options and terms materialize.

Aside from organic growth, Stanley acquired Oberon Associates in June for $170 million. The company, which provides engineering, operational intelligence and IT services, expands Stanley's customer base to include the U.S. Army, U.S. Air Force, Defense Information Systems Agency, and several other agencies throughout the intelligence community.

Wachovia analyst Edward Caso expects the Oberon acquisition to add $0.01 to $0.02 to earnings in 2009 and purports the acquisition will be more accretive in 2010, as it adds higher margin intelligence capabilities to Stanley’s service offerings. “Stanley continues to be the fastest (organically) growing government services provider by far,” Caso wrote in a research note on August 1. “We believe estimates will continue to drift upward as the company rationalizes the competitive synergies . . .

Small-cap stocks edged lower on the open, pulled down by overseas equities declines and an on-going rout in the financial arena. At 10:02 a.m. ET, the Russell 2000 (NYSE:IWM) was down 12.36, or 1.72%, at 707.45, sinking to the lowest level since April 24.

Into the U.S. stock market opening, prices for “black gold” were off from the overnight highs quite a bit, which helped trim opening losses for equities. In overnight action, crude oil prices climbed near $139 dollars a barrel amid rumors of an attack on Iran. The rumors were denied by Iranian officials and crude oil prices gradually pulled back off the highs. By the opening, crude oil prices actually slipped into the red a tad and were bouncing back and forth around steady levels.

The consumer confidence report came out at 50.4, which was well below the forecast of 56 and down from a revised 58.1 reading last month. The figure was a fresh 16-year low and equity markets and the U.S. dollar extended losses after the soft data on confidence.

The FOMC started a two-day policy meeting today, and some traders may go into hibernation waiting for the official rate news Wednesday afternoon. Fed funds futures have priced out any chance for a rate hike from this meeting, and the market is expecting interest rate policy to move into a hold mode.

The Case-Shiller U.S. home price index came out at minus 1.4% versus minus 2.2% in March. The year-over-year decline was a whopping minus 15.3%; although the numbers are numbingly bad on face value, they were actually a touch better than feared, sparking hope that housing market declines are nearing some kind of . . .

The Russell 2000 (NYSE: IWM) and the other major U.S. indices are posting gains on upbeat news from major corporate players.
 
At 10:34 a.m. ET, the small-cap index had added 4.89 points, or 0.72%, to 685.46. The Dow Jones Industrial Average (INDU) was up 121.98 points, or 1.07%, to 12,289.19.

Small-cap stocks opened in the green on news that General Electric Co. (NYSE: GE) reported a fourth-quarter profit from continuing operations of $6.82 billion, or $0.68 per share, compared with $5.95 billion, or $0.58 per share, a year earlier. The result matches analysts’ expectations.

The earnings increase was largely due to strong demand for the Fairfield, Conn.-based company’s heavy equipment products.

Also contributing good news is International Business Machines Corp. (NYSE: IBM), which reported fourth-quarter earnings and issued a 2008 guidance above Wall Street’s projections.

In economic news, the Reuters/University of Michigan consumer sentiment index rose to a level of 80.5 in January from December’s 75.5. That came as a surprise to economists, who were expecting the measure to post a small decline. The index tracks consumers’ willingness to spend money.

Transaction processing services for government agencies is a large, growing market. Companies that provide these services under long-term contracts with the U.S. government enjoy years of recurring revenues since contract terms typically range from two to ten years.

Two small-cap beneficiaries: Tier Technologies, Inc. (Nasdaq: TIER) and Stanley, Inc. (NYSE: SXE).

A large market for electronic payment processing is developing around tax collection. The Taxpayer Relief Act of 1997 authorized the U.S. Treasury to accept credit and debit card payments for federal taxes. In 2006, the IRS expanded credit card payment options to include business tax payments. Between 2001 and 2006, the number of taxpayers making card-based payments grew 47% annually, to 2 million from 288,000.

Despite this rapid growth, credit/debit card payments currently represent just 1.2% of personal and business taxes paid, suggesting a large, untapped market.

The total market for personal and business federal tax payments exceeded $1.8 trillion on a net basis in 2006. The state tax market also presents significant growth opportunities. State tax receipts were estimated at $706 billion in 2006, with individual income taxes representing $244 billion of the state total and sales taxes accounting for $226 billion of the total. Of the 50 states, 26 have already adopted card-based payments. The local market for tax payment processing consists of some 3,000 counties, 13,500 school districts, 16,500 townships and more than 19,400 municipalities across the United States.

Other payment processing opportunities in the public sector include university tuition payments and utilities bills. According to the U.S. Department of Education, there are 6,400 degree-granting colleges and universities in the United States serving 17 million students and generating annual tuition payments of $230 billion. The U.S. Census recorded 6,700 public utilities across the United States generating consumer payments totaling nearly $400 billion annually.