Fiber connectivity firm Clearfield's Q3 net sales rise; lowers FY outlook

Fiber connectivity firm Clearfield's fiscal Q3 net sales rose 13% year over year, and EPS increased 38%.

Gross margin declined due to an inventory charge, partly offset by recoveries and tariff refunds.

• Inventory charge - Gross margin was reduced by a $2.6 million inventory charge tied to an order the company no longer expects to fulfill.
• Inventory recoveries and tariff refunds - Gross margin benefited from $1.4 million of inventory recoveries and $655,000 in tariff refunds, though these were partially offset by other inventory provisions.
• Lower operating expenses - Operating expenses declined due in part to a $1.7 million reduction in performance-based compensation accruals.

The company repurchased $0.9 million in shares.

The current average analyst rating on the shares is "buy" and the breakdown of recommendations is 4 "strong buy" or "buy", no "hold" and no "sell" or "strong sell".

The average consensus recommendation for the communications & networking peer group is "buy".

Wall Street's median 12-month price target for Clearfield Inc is $44.50, about 31.9% above its August 4 closing price of $33.74.

The stock recently traded at 35 times the next 12-month earnings versus a P/E of 31 three months ago.