[Satellite TODAY Insider 09-29-11] Comtech Telecommunications reported better-than-expected EBITDA in its 2011 fourth quarter, however, the company was stung with a decline in profit and lower military MTS and BFT-1 tracking sales to the U.S. Army, according to Comtech’s latest financial results, issued Sept. 27.

   Comtech’s EBITDA of $28 million beat analysts’ consensus by 13 percent at $24.8 million, but that growth was driven by the company’s expiring mobile data business rather than its core telecom transmission product line, which forced Comtech management to lower its full-year 2012 EBITDA guidance from $75 million to a range between $70 million and $75 million. Comtech CEO Fred Kornberg also said he anticipates 2012 satellite modem sales to be “slightly higher” than its full-year 2011 results, while OTH sales will be lower next year compared to 2011.

   The company’s telecom sales declined 7 percent sequentially and were below management’s forecast of slight growth, due primarily to lower military orders and military budgetary pressures. Raymond James Analyst Chris Quilty said Comtech’s telecom performance was 5.8 percent below his estimate for the fourth quarter.

   “Margins were also below our expectations at 18.4 percent versus our estimate of 23 percent,” Quilty told Satellite TODAY Insider. “We anticipate this guidance will be viewed unfavorably, given the segment’s core role in the company’s long term performance. As a reminder, Comtech’s mobile data segment experienced revenue weakness during the third quarter due to vendor component delays, which management expected to be resolved during the fourth quarter.”

   Comtech’s revenues did, however, increase 32 percent sequentially along with EBIT margins, but Quilty said he believes this margin performance is “unsustainable and we are currently forecasting EBIT margins of 5 percent to 10 percent throughout FY12.”

   Kornberg also announced that his company received a call from its major investor, MMI Investments, to inform Comtach that it has nominated two candidates to its board of directors. “Earlier this year, MMI pursued a similar activist role with EMS Technologies that eventually persuaded management to ‘explore strategic alternatives,’ thus leading to the [EMS] sale to Honeywell for a 59 percent premium versus the stock price at time of management’s announcement,” said Quilty. “Comtech announced a 10 percent dividend hike to $1.10 ­– a $100 million boost to their share repurchase program, which is now $250 million – and nominated a ‘lead independent director.’ We doubt these measures will be sufficient to assuage the demands of MMI.”