NEW YORK (TheStreet) -- Shares of Brocade Communications Systems (BRCD) were falling 4.98% to $11.36 on heavy trading volume Thursday after networking server and storage manufacturer QLogic (QLGC) warned it will report lower fiscal first quarter results than previously expected.
QLogic lowered its fiscal first quarter EPS guidance to a range of 16 cents to 17 cents a share, well below its previous guidance of 23 cents to 27 cents a share. The company lowered its fiscal first quarter revenue guidance to about $113 million from its previous range of $124 million to $132 million.
The networking server and storage company said the lower guidance is due to lower than expected demand and general weakness in its traditional enterprise server and storage markets as well as a build-up of inventory at certain OEM customers due to slower next-generation server transitions in enterprise environments.
Brocade provides Fibre Channel and Ethernet switches, and other products for enterprise servers.
About 4 million shares of Brocade were traded by 10:51 a.m. Thursday, above the company's average trading volume of about 3.6 million shares a day.
TheStreet Ratings team rates BROCADE COMMUNICATIONS SYS as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:
"We rate BROCADE COMMUNICATIONS SYS (BRCD) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. 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, solid stock price performance, impressive record of earnings per share growth and compelling growth in net income. Although the company may harbor some minor weaknesses, we feel they are unlikely to have a significant impact on results."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- BRCD's revenue growth has slightly outpaced the industry average of 0.0%. Since the same quarter one year prior, revenues slightly increased by 1.8%. Growth in the company's revenue appears to have helped boost the earnings per share.
- The current debt-to-equity ratio, 0.32, is low and is below the industry average, implying that there has been successful management of debt levels. Along with this, the company maintains a quick ratio of 2.85, which clearly demonstrates the ability to cover short-term cash needs.
- Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period. Although other factors naturally played a role, the company's strong earnings growth was key. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
- BROCADE COMMUNICATIONS SYS 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, BROCADE COMMUNICATIONS SYS increased its bottom line by earning $0.54 versus $0.45 in the prior year. This year, the market expects an improvement in earnings ($0.96 versus $0.54).
- 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 663.0% when compared to the same quarter one year prior, rising from -$13.68 million to $77.04 million.
- You can view the full analysis from the report here: BRCD Ratings Report