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The embarrassing bounce in the Speedcast share price

The embattled Speedcast International Ltd (ASX: SDA) share price is staging a remarkable turnaround today that is likely to earn the company a speeding ticket from the share market operator ASX Ltd (ASX: ASX).

The Speedcast share price surged 10% to $1.89 and is the best performer on the S&P/ASX 200 (Index:^AXJO) (ASX:XJO) on Thursday with the Hub24 Ltd (ASX: HUB) share price and the Eclipx Group Ltd (ASX: ECX) taking the second and third spots on the leader board, respectively.

There is no new ASX announcement from Speedcast to explain sharp turnaround after the stock suffered huge losses in the previous two days that was triggered by a profit downgrade.

The good news Speedcast forgot to tell the ASX

The interesting thing is that the downgrade was released to the ASX but today’s share price resurrection on the back of a US contract win was not!

However, management thought it fit to issue a press release on the contract win instead and posted it on the Speedcast website. Whoever’s responsible for the satellite services group’s investor relations should be taken out back.

The press release explained that Speedcast’s subsidiary, Speedcast Government, is one of multiple parties that was awarded a US$3 billion five-year contract with the U.S. Department of Homeland Security (DHS).

“Speedcast Government is honoured to have been selected as an awardee under the TacCom II vehicle. We are committed to bringing leading-edge technologies, equipment, network and technical services to support DHS and its end users on this important program,” said Moe Abutaleb, CEO of Speedcast Government.

Why a US$3 billion win may not be so exciting

There’re no details on what slice of the US$3 billion pie Speedcast was awarded and maybe the amount is immaterial – hence the company’s decision not to issue an ASX announcement.

Either way, it’s a bad look for Speedcast, which on Tuesday cut its full year underlying earnings before interest, tax, depreciation and amortisation (EBITDA) guidance to between US$140 million and US$150 million from its earlier forecast of US$160 million to US$171 million.

The downgrade was due in part to weaker than expected performance from its recently acquired Globecomm business and poor performance from the commercial maritime and Enterprise and Emerging Markets (EEM) markets.

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Brendon Lau has no position in any of the stocks mentioned. Connect with him on Twitter @brenlau.

The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Hub24 Ltd. The Motley Fool Australia has recommended Hub24 Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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