NEW YORK (TheStreet) -- ADT (ADT - Get Report) shares are climbing 6% to $35 on Wednesday following the release of the company's third quarter earnings results.
The home security protection provider reported net income of $82 million, or an adjusted 55 cents per diluted share, 8 cents better than analysts had expected.
Revenue for the quarter was $849 million, just ahead of analysts $847.5 million expectations.
TheStreet Ratings team rates ADT CORP as a Sell with a ratings score of D+. TheStreet Ratings Team has this to say about their recommendation:
"We rate ADT CORP (ADT) a SELL. This is driven by multiple weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its unimpressive growth in net income, generally high debt management risk and generally disappointing historical performance in the stock itself."
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Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Commercial Services & Supplies industry. The net income has significantly decreased by 41.1% when compared to the same quarter one year ago, falling from $107.00 million to $63.00 million.
- Currently the debt-to-equity ratio of 1.51 is quite high overall and when compared to the industry average, suggesting that the current management of debt levels should be re-evaluated. To add to this, ADT has a quick ratio of 0.57, this demonstrates the lack of ability of the company to cover short-term liquidity needs.
- The share price of ADT CORP has not done very well: it is down 20.46% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
- ADT CORP's earnings per share declined by 27.6% 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, ADT CORP increased its bottom line by earning $1.88 versus $0.40 in the prior year. This year, the market expects an improvement in earnings ($1.89 versus $1.88).
- When compared to other companies in the Commercial Services & Supplies industry and the overall market, ADT CORP'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: ADT Ratings Report