NEW YORK (TheStreet) -- RF Micro Devices (RFMD) was rising 8.26% to $5.29 on Wednesday after Canaccord reiterated its "buy" rating and increased its target price to $7.25 after the integrated circuits manufacturer released its third-quarter results.
The company reported net profit of $36.4 million, or 13 cents a share, which met analysts' EPS expectations. It also marked an increase from net profit of $21.3 million and earnings of 8 cents a share, in the same period one year earlier. RF Micro Devices reported revenue of $289 million, up from $271 million in the same quarter a year earlier. Analysts had expected revenue of $320 million.
The manufacturer also forecast fourth-quarter guidance and expects revenue to fall in the range of $250 million to $260 million with an EPS of 9 cents to 10 cents a share. That number is below consensus estimates of 11 cents a share.
Despite this, Canaccord raised its target price thanks to RF's gross margin for the quarter.
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"While Q4/F'14 sales guidance was well below our and consensus estimates, RFMD guided to a strong 40% gross margin for the quarter," Canaccord's report states. "Given RFMD's strong relationship with Samsung, leading position with the Chinese smartphone OEMs combined with our expectations for RFMD to further grow RF $- content in Apple's next-gen iPhone products, we believe RFMD has now secured strong market share with all the three major constituents of the smartphone ecosystem and is well positioned for continued solid growth trends."
TheStreet Ratings team rates RF MICRO DEVICES INC as a "hold" with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:
"We rate RF MICRO DEVICES INC (RFMD) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures and compelling growth in net income. However, as a counter to these strengths, we find that the stock has had a generally disappointing performance in the past year."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth greatly exceeded the industry average of 5.0%. Since the same quarter one year prior, revenues rose by 48.2%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- RFMD's debt-to-equity ratio is very low at 0.13 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.41, which illustrates the ability to avoid short-term cash problems.
- RF MICRO DEVICES INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, RF MICRO DEVICES INC reported poor results of -$0.20 versus $0.00 in the prior year. This year, the market expects an improvement in earnings ($0.44 versus -$0.20).
- Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Semiconductors & Semiconductor Equipment industry and the overall market, RF MICRO DEVICES INC's return on equity significantly trails that of both the industry average and the S&P 500.
- RFMD has underperformed the S&P 500 Index, declining 6.96% from its price level of one year ago. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
- You can view the full analysis from the report here: RFMD Ratings Report