NEW YORK (TheStreet) -- AOL
(AOL - Get Report) shares are falling hard, down -24.4% to $33.18, after missing analyst earnings estimates.
The company posted first quarter earnings of 34 cents per diluted share, significantly below analysts estimates of 45 cents.
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AOL, which is in the midst of a operational turnaround as it switches from an internet service provider to a media company, saw revenue rise 8% from the previous year to $583.3 million as ad sales increased 43% in the quarter.
Analysts were expecting revenue of $577.7 million.
TheStreet Ratings team rates AOL INC as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:
"We rate AOL INC (AOL) 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 revenue growth, largely solid financial position with reasonable debt levels by most measures, reasonable valuation levels, good cash flow from operations and growth in earnings per share. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Despite its growing revenue, the company underperformed as compared with the industry average of 20.6%. Since the same quarter one year prior, revenues rose by 13.3%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- Although AOL's debt-to-equity ratio of 0.05 is very low, it is currently higher than that of the industry average. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.27, which illustrates the ability to avoid short-term cash problems.
- Net operating cash flow has increased to $90.00 million or 17.34% when compared to the same quarter last year. Despite an increase in cash flow, AOL INC's average is still marginally south of the industry average growth rate of 22.53%.
- AOL INC's earnings per share improvement from the most recent quarter was slightly positive. 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, AOL INC reported lower earnings of $1.12 versus $11.02 in the prior year. This year, the market expects an improvement in earnings ($2.27 versus $1.12).
- You can view the full analysis from the report here: AOL Ratings Report