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No. of Recommendations: 1
ARP reports Q1 2008 on May 8 AMC.
Analysts expect 37 cents with a range of 36 to 38c. Year ago earnings were 37c. Revenue estimate $183.4M range $180-186M.
TTM P/E 10.40 FYE P/E 10.13.
So it would have to be a bad miss and or lowered guidance to send the stock much lower. While hitting the estimates with no change to guidance would be OK to good and any beat will result in upward move.

Closed 24 April $15.70.
I wish to sell ARP in the near term as I have decided:
1. It is not one of my top twenty holding.
2. It is a small holding which at this point I do not want to add to.
3. Risk of a commercial slow down.
4. If industry conditions change and I am still paying attention then re-entry should be possible with minimal missed upside. For example if a golden cross, 50dma crossing above the 200dma, was to happen in the near term then that would occur around $18.

Last quarter was good despite the poor market conditions http://boards.fool.com/Message.asp?mid=26379338
Revenue was up 18.5% QoQ with yearly revenue up 16.3% 2008 Revenue Forecast of $ 720.0 Million to $ 760.0 million; EPS of $1.52 to $1.60. Analysts are at $1.53.

2007 <SNIP>
• We dramatically expanded our footprint to 308 locations including the addition of 19 new companies.
• in deteriorating market conditions, management was able to quickly implement significant controls within the company during the latter, and traditionally slower, part of the year to improve both sales and margins
• ARC ended its year in excellent fiscal condition, and with tremendous flexibility in its capital structure</SNIP>

If they confirm guidance then company could easily be re-rated by the market with a P/E of 12 easily achieved giving a target of $18. If they do meet guidance and confirm then they would trade even higher over the next couple months with $21 coming through a P/E multiple expansion to 14.

It would take a large miss and poor guidance to drive the multiple lower with $14 appearing like a bad case outcome, though $11 possible if guidance is lowered to under $1.40. From current price that’s a likely 2.3/1.7 return to risk n the near term. With a wider 5.3/4.7 return to risk.
I’ll take those odds as I consider the chance of a meet or beat slightly higher than a miss. So I’ll hold through earnings with a mental stop at $14 and a sell if commercial conditions have already started to deteriorate.

Dean
Very small position
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