CNIT Q2 2011 Earnings

Here's the official press release.

• "Revenues decreased 16.79% YoY to US$27.89 million
• Gross Profit decreased 29.03% YoY to US$ 11.92 million, with Gross Margin shrinking to 42.75 %
• Operating Profit decreased 54.98% YoY to US$ 5.46 million
• Non-GAAP Net Income decreased 43.03% YoY to US$ 5.63 million
• Non-GAAP Fully Diluted EPS was US$ 0.11
• Cash flow from operations was US$1.90 million vs. $3.45 million a year ago"

They're blaming the unexpected slowdown to tightening policies by the Chinese government as it attempts to slow inflation (e.g.: reduced investments in infrastructure projects). They restated that they were still fairly pleased with generating $30M in new contracts during the quarter (I'm assuming this is future recurring revenue) and improvements in their Display Technology product sales as well as System Integration services sales.

It's going to be ugly today, and possibly for a while, despite this news not really changing that the company is still dirt cheap.

CNIT failed to meet estimates only twice before, in Q1 2009 and Q4 2010. Here's what happened on each of those days:

• Q1 2009: EPS was $0.09 vs. an expected $0.13, a -30.77% miss. The stock opened down about 14% and continued to fall during the day, ending with a 20.57% fall. The stock recovered its pre-earnings level 2 months later, during a run-up coming prior to the following earnings statement, where it beat.
• Q4 2010: EPS was $0.21 vs. an expected $0.23, a -8.70% miss. The stock opened nearly intact (up about 1% but, while it reached an HOD a couple points higher, ended the day down 14.69%. The stock has not recovered since, as this came just over 5 months ago at which point CNIT was in the huge downtrend that has taken it to today's levels.

Needless to say, there should be a fairly sizable drop today, with possibly some opportunities to profit from day trading long if you consider it gets oversold. Of course, I can't possibly be short, so I'll either stick to buying some more cheap shares (i'm very low on shares, ever since I got mostly into cash a few weeks ago), or by staying clear and seeing where it goes.