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Why Liquidity Services (LQDT) Is Up Today

NEW YORK (TheStreet) -- Liquidity Services (LQDT) was rising 14.5% to $24.38 Friday after beating analyst estimates for earnings and revenue in its fiscal first-quarter earnings report.

The company posted earnings of 32 cents a share for the first quarter, beating the Capital IQ Consensus Estimate of 22 cents a share by 10 cents. Revenue fell 0.2% year-over-year to $121.9 million, but still beat analyst estimates of $111.2 million.

Liquidity Services issued downside guidance for the second quarter for earnings between 33 cents and 37 cents a share. Analysts expect 46 cents a share in earnings for the quarter.

Despite the weak second-quarter guidance, the company reaffirmed its full year 2014 guidance with earnings between $1.60 and $1.76 a share. Analysts estimates call for earnings of $1.60 a share for the year.

Must read: Checking In on Six Earnings Plays

TheStreet Ratings team rates LIQUIDITY SERVICES INC as a Hold with a ratings score of C+. TheStreet Ratings Team has this to say about their recommendation:

"We rate LIQUIDITY SERVICES INC (LQDT) 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 increase in net income, revenue growth and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity, poor profit margins and a generally disappointing performance in the stock itself."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Internet Software & Services industry. The net income increased by 87.7% when compared to the same quarter one year prior, rising from $5.55 million to $10.41 million.
  • LQDT's revenue growth trails the industry average of 17.2%. Since the same quarter one year prior, revenues slightly increased by 5.6%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • LIQUIDITY SERVICES 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, LIQUIDITY SERVICES INC reported lower earnings of $1.26 versus $1.47 in the prior year. This year, the market expects an improvement in earnings ($1.60 versus $1.26).
  • The gross profit margin for LIQUIDITY SERVICES INC is currently lower than what is desirable, coming in at 34.45%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 8.06% significantly trails the industry average.
  • Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. When compared to other companies in the Internet Software & Services industry and the overall market, LIQUIDITY SERVICES INC's return on equity is below that of both the industry average and the S&P 500.
  • You can view the full analysis from the report here: LQDT Ratings Report

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