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TheStreet Open House

Why Ericsson (ERIC) Stock Is Falling Today

NEW YORK (TheStreet) -- Ericsson (ERIC) was falling 3.8% to $12.63 Monday following the news that vice president and global head of strategy Douglas Gilstrap will resign on Aug. 1.

Gilstrap joined the wireless network equipment maker in 2009. In his time with the company Gilstrap helped dissolve the ST-Ericsson joint venture and integrate the modem business.

"Douglas has been instrumental in shaping Ericsson's strategy with his broad industry knowledge, business development and transactional skills during the five years that he has been with the company," CEO Hans Vestverg said in a statement. "He has played a leading role in all M&A and key commercial activities during these years, strengthening Ericsson's position across all business segments."

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TheStreet Ratings team rates ERICSSON as a Buy with a ratings score of B+. TheStreet Ratings Team has this to say about their recommendation:

"We rate ERICSSON (ERIC) a BUY. This is driven by some important positives, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its impressive record of earnings per share growth, compelling growth in net income, largely solid financial position with reasonable debt levels by most measures, attractive valuation levels and expanding profit margins. We feel these strengths outweigh the fact that the company shows weak operating cash flow."

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

  • ERICSSON reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, ERICSSON increased its bottom line by earning $0.58 versus $0.28 in the prior year. This year, the market expects an improvement in earnings ($0.84 versus $0.58).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Communications Equipment industry. The net income increased by 201.9% when compared to the same quarter one year prior, rising from -$976.55 million to $995.44 million.
  • Although ERIC's debt-to-equity ratio of 0.21 is very low, it is currently higher than that of the industry average. To add to this, ERIC has a quick ratio of 1.84, which demonstrates the ability of the company to cover short-term liquidity needs.
  • 42.18% is the gross profit margin for ERICSSON which we consider to be strong. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, ERIC's net profit margin of 9.59% significantly trails the industry average.
  • You can view the full analysis from the report here: ERIC Ratings Report

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Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

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