Better than expected guidance not the real catalyst for Data#3

The IT company's guidance may be at the upper end of its previous forecast, but investors have only shown a lukewarm response. The short-term catalyst for the stock will be the upcoming federal election.

Information technology solutions company Data#3 (DTL) issued a better than expected profit guidance for the past financial year but this is unlikely to put investors in a more bullish mood.

Management said this morning that net profit for 2012-13 will fall 11.5% to around $12.1 million, which is ahead of the $11.7 million consensus forecast reported on Bloomberg and at the upper end of management’s previous guidance of between $11 million and $12.5 million.

The stock ticked up 1 cent to $1.14 and the lacklustre response should come as no surprise given that Data#3, which is part of the Uncapped 100, had admitted it is facing a tough year ahead.

Further, RBS Morgans believes the IT services sector will only feel any real recovery in earnings in the second half of 2013-14 and analysts polled on Bloomberg are forecasting a flat result for the current financial year.

However, the real catalyst for the stock could come from the federal election. Clarity over who will run the country will enable government departments to start spending more freely on IT again.

Even if government IT spending takes time to flow through, investors are likely to be happy to pay it forward – meaning to take a position in stocks like Data#3 on the belief that earnings will improve in the not too distant future.

Who says all investors suffer from short-termism?

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