Story updated at 10 a.m. to reflect market activity.
CA Technologies fell -2% to $28.81 in morning trading.
The firm reiterated its "equal weight" rating and $36 price target for the company. Analysts Raimo Lenschow and Saket Klia cite CA Technologies' agreement with Marlin Equity Partners to divest its arcserve data protection business for an undisclosed sum.
"The divestiture should not come as a surprise given that the company completed a similar transaction with Embarcadero Technologies for its data modeling business last quarter," the analysts wrote. "We also note that management has repeatedly stated over the past year that CA needs to trim its product portfolio to better focus on more strategic business units like IT Business Management, DevOps and Security."
Separately, TheStreet Ratings team rates CA INC as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:
"We rate CA INC (CA) 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 reasonable valuation levels, expanding profit margins, largely solid financial position with reasonable debt levels by most measures and increase in stock price during the past year. We feel these strengths outweigh the fact that the company has had sub par growth in net income."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The gross profit margin for CA INC is currently very high, coming in at 84.57%. Regardless of CA's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, CA's net profit margin of 9.65% is significantly lower than the industry average.
- CA INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past year. However, we anticipate this trend reversing over the coming year. During the past fiscal year, CA INC reported lower earnings of $1.99 versus $2.07 in the prior year. This year, the market expects an improvement in earnings ($2.50 versus $1.99).
- CA, with its decline in revenue, underperformed when compared the industry average of 7.9%. Since the same quarter one year prior, revenues slightly dropped by 3.7%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- Despite currently having a low debt-to-equity ratio of 0.34, it is higher than that of the industry average, inferring that management of debt levels may need to be evaluated further. Regardless of the somewhat mixed results with the debt-to-equity ratio, the company's quick ratio of 1.03 is sturdy.
- You can view the full analysis from the report here: CA Ratings Report