It’s a juicy time of the year right now for Wall Street with thousands of companies releasing earnings in the next few weeks that will either disappoint investors or help to allay their fears of the companies they cover.

It’s no different for us, as 4 of the companies that I cover either have reported, or are set to report earnings within a couple of weeks of each other.

Today we’re going to preview PeakStocks.com portfolio recommendation AuthenTec Inc. (Nasdaq: AUTH), which will be announcing their second quarter earnings and host their analyst conference call after the market closes on Monday July 28th, 2008.

In this post I’ll go over the important aspects that we need to be aware of before they announce earnings and then break them down into the following parameters:

• What went right in the quarter: What were some of the positive developments that occurred within the company in the last 3 months.
• What went wrong in the quarter: What were some of the negative developments that occurred within the company in the last 3 months.
• What I want to see: All things considered, what I realistically want to see from the company as it relates to their business.
• What we need to see: At the minimum, what we need to see for our investing thesis to still hold and an investment in this company to be prudent.
• What we’ll probably see: After weighing what’s been going on for the last 3 months, what we can realistically expect when they do announce their earnings.
• Bottom Line: What it all means, and what you should do.

AuthenTec Inc.

Firing on all cylinders, but will it continue?

AuthenTec (Nasdaq: AUTH) is the world’s leading provider of fingerprint sensors and solutions to the wireless, PC and Access Control Markets.

AuthenTec makes cool products that are being continually integrated into all sorts of gadgets and are the only fingerprint sensors on the market that read below the surface of the skin to where the “live” layer resides, and your true fingerprint can be measured free from any outside interferences.

AuthenTec has met or beaten analyst’s estimates EVERY single quarter as a public company, and I expect that to continue this time around.

What some weren’t expecting however, was the raised guidance last time around, and the continued execution of the business into new markets, new sensor technology and packaging, and ultimately, better than expected execution of both top and bottom line figures.

So the question to ask as AuthenTec gets set to report their second quarter earnings is will this continue?

• What went right in the quarter: It was a banner quarter for AuthenTec, with AuthenTec now having shipped over 30 million fingerprint sensors and counting.

Other positive developments included everything from new sensors and packaging, to a patent litigation win against one of their rivals Atmel Corp. (Nasdaq: ATML), all leading to an outstanding quarter, at least from the product and business standpoint.

You can read my full update on the company’s latest products here.

You can read the full update of AuthenTec’s summary judgment win against Atmel here.

All signs point to continued execution and a dynamic brand that will start to become ubiquitous as more and more countries, particularly the U.S., start to utilize cell phones with fingerprint sensors for M-Commerce, AKA: Mobile Commerce, whereby customers can pay for merchandise by swiping their fingerprint-enabled cell phones instead of using cash or credit cards.

• What went wrong in the quarter: If there was a blemish on an otherwise sterling quarter, it was the fact that AuthenTec dipped back into the litigation pool, this time against a privately held company called Atrua Technologies.

Just when it looked like AuthenTec’s management had settled their only outstanding litigation, AuthenTec filed suit against Atrua and then Atrua filed a countersuit against AuthenTec.

This is probably going to get messy.

You can read my whole breakdown on this latest litigation here.

• What I want to see: All things considered, what I realistically want to see from the company is continued execution of the business.

Because AuthenTec already raised guidance and top and bottom line expectations for this quarter and full year 2008, it’s not as important to me that they do it again, although more than likely, they will at least meet analyst’s expectations, and more than likely beat them as well.

I want to get more clarity in the conference call concerning the latest litigation, as well as learn about new product introductions and implementations that are supposed to be on track for the back half of 2008 and into 2009, when AuthenTec’s revenues and profit are really expected to take off.

• What we need to see: At the minimum, what we need to see for our investing thesis to still hold and an investment in this company to be prudent is for AuthenTec to simply continue their brilliant execution thus far.

If they have a slight hiccup in terms of a product launching later than expected, or having to push some of their results further into the back half of this year or early next year, that might cause a temporary drop in their stock price due to short sighted investors, but shouldn’t dilute the story at all as far as we are concerned.

In addition, management has always maintained that because AuthenTec is such as small company and growing rapidly, they haven’t seen and weren’t expecting to see, any headwinds due to a consumer slowdown in spending, or slowdowns in the overall PC market.

We’ll have to listen carefully to see if this story has changed at all.

• What we’ll probably see: More of the same, which in this case, is a good thing!

AuthenTec will most likely meet or beat top and bottom line expectations, with a decent chance that they will also raise guidance as a result, or because of continued visibility into their future order process, customer backlog, and revenue stream.

• Bottom Line: It would take an utter shift in business trends at AuthenTec to shake my confidence in the company, the story and management.

I don’t see that happening, and although shares of AuthenTec may seem to be “expensive” even at today’s BELOW IPO levels, I recently did a full post on how this is not the case at all, and how AuthenTec deserves a rich premium to its peers for its patented portfolio of sensors and technology, its leadership position in the marketplace, and the continued up-till-now, flawless execution of its management team.

Buy shares of AuthenTec with confidence before earnings are released or wait till after, either way, my investing thesis is more than likely to remain sound, and undeterred.

You can read my latest buy recommendation and analysis on AuthenTec here.

New to the AuthenTec story?

Click here to read my complete AuthenTec research report and buy recommendation

 

*Variables You Should Know About AuthenTec (Nasdaq: AUTH)
Current Recommendation:	STRONG BUY
The Company:	AuthenTec, Inc., is a fabless mixed-signal semiconductor company that provides fingerprint authentication sensors and solutions to the high-volume personal computer (PC), wireless device, and access control markets.
Why Buy Now:	Proprietary and Patented Technology Low-Cost Advantage Continuous Technological Innovation Huge Growth In an Expanding and Rapidly Developing Market CEO Founder With Sizeable Stake in Company Strong Relationships With Leading Global PC and Wireless Device Manufacturers Addressable market of over 1 Billion units per year New Company on the Precipice of Fundamental Breakout Fantastic Stock Price, around IPO level High Margin Business Multiple Revenue Streams
Market Cap:	$288.8
Revenue (TTM):	$58.60
Cash/Debt:	$67 / $0
Current Price:	$10.00
Risk Rating (?):	7.5 (Moderate-High)
Position Size (?):	1/4 (12-17-07), 1/4 (1-17-08), 1/4 (1-23-08), 1/4 (7-3-08)
Buy Around Price (?):	$13.50 (12-17-07), $13.25 (1-17-08), $12.00 (1-23-08), $10.00 (7-3-08)

*As of 7-18-08. Except share price, all values in millions.