Despite these results, which kept Comtech’s full-year 2013 revenues in line with its guidance, investors reacted to the results with a 3 percent sell off. Raymond James Analyst Chris Quilty believes the sell off reflected disappointment in the board’s failure to authorize a new buyback, and concern regarding weakness in the company’s core Telecom product line.

   “While Comtech’s telecom segment had another rough quarter, with revenue down for its third consecutive quarter, management expects sales to increase in the full year of 2013, aided by: a $55 million, three-year OTH (over-the-horizon) contract awarded earlier this year; the possibility of at least one large OTH order during 2013; strong international demand for earth station modems; a more favorable U.S. government purchasing environment; and a solid 1.9x book-to-bill achieved in the fourth quarter,” said Quilty. “We are affirming our ‘Market Perform’ rating.”

   Comtech CEO Fred Kornberg also announced that the company would be winding down its microsatellite business. Quilty said the microsatellite product line was, “never a crucial element in the Comtech story, but had been a dependable revenue contributor with promising long-term upside potential. Management is forecasting no microsatellite revenue in the full year 2013 and anticipates $1 million of wind down costs in the first quarter of 2013.”

   Kornberg expects 2013 full-year revenues to decline approximately 9 percent to $385 million, but added that EPS and EBITDA should remain flat due to an improvement in EBIT margins. Comtech’s backlog increased 6 percent year-over-year to $153.9 million with a book-to-bill of 1.1x reflecting positive order strength in its Earth station and RF amplifiers product lines.

   Quilty forecasts full-year 2014 revenues and adjusted EBITDA to grow 5 percent and 8 percent, respectively.