Analysts covering Spokane-based Key Tronic Corp. claim that the keyboard maker, with its new focus on contract design and manufacturing, appears to have executed a successful turnaround and should post increasingly positive earnings in its current fiscal year, which started in July.


Key Tronics revenue during fiscal 2001 should rise about 22 percent to $200 million, Richard Owens, a then Portland, Ore.-based analyst with D.A. Davidson & Co., of Great Falls, Mont., told Seattle-based Marples Business Newsletter in mid-August.


Contract design and manufacturing revenues will probably rise strongly in fiscal 2001, with growth coming from both existing and new customers, reported Lucien Virgile, an analyst with New York City-based Value Line Inc., in The Value Line Investment Surveys ratings and reports section published July 21.


Feelings are more positive, says Key Tronics President and CEO Jake Oehlke. Weve turned the corner as far as the transition (to a contract manufacturer) goes.


Key Tronic reported that 75 percent of its total revenue in the quarter ended July 1 came from non-keyboard contract work, and the company is gaining acceptance as a contract design and manufacturing company, he says.


As we continue to grow that business, profitability should follow, Oehlke says.


Since giving the interview to Marples, Owens has left D.A. Davidson and couldnt be reached for comment. D.A. Davidson, which now isnt covering Key Tronic, says it might add coverage of Key Tronic again later. The company didnt have a phone number for Owens.


Though Owens maintained a neutral rating for Key Tronics stock, he estimated earnings per share of 20 cents during fiscal 2001 and set a long-term price target of $20 for the companys stock, Marples reported. In the past year, Key Tronics stock price has ranged from $2.37 to $4.93, and it has climbed above $5 for only two brief periods since late 1997. Virgile, who ranks the stock as below average, gives Key Tronic a target price range of $6 to $12. Key Tronic closed at $4.43 Monday, and has held steady around $4 for much of the summer.


If what smells like a genuine turnaround is indeed real and can be sustained, todays stock price of around $4 will look like a bargain somewhere down the line, Marples says. The newsletter adds that Key Tronics shares are risky, and that the company will have to turn in several quarters of positive results before gaining credibility with investors and analysts.


In the Value Line report, Virgile says Key Tronics profit potential is limited in the next three to five years. He says, however, that the companys contract-manufacturing volume, which now is on pace to total more than $125 million this fiscal year, likely will double in that period. While contract manufacturers who make printed circuit boards net about 2 percent of sales, Key Tronics rarer specialties of injection molding and electromechanical assembly should push its potential net margin to between 3 percent and 5 percent, Virgile says.


In its most recent results, Key Tronic reported that net income for the quarter ended July 1 was $19,000, or less than a penny per diluted share, compared with $689,000, or 7 cents per diluted share, in the year-earlier quarter. Total revenue for the quarter, the companys fourth fiscal quarter for fiscal 2000, was $47 million, up from $42.9 million in the year-earlier quarter.


Owens predicted the company would post a modest loss of 3 cents a share in the quarter that will end in early October, then have positive earnings for the remainder of the fiscal year.