Brocade Communications (BRCD) Stock Furthers Losses on Weak Outlook - TheStreet

NEW YORK (TheStreet) -- Brocade Communications Systems (BRCD) stock is falling by 8.33% to $9.25 on heavy trading volume on Tuesday, after the company issued weak fiscal 2016 guidance.

After the market close on Monday, the networking equipment supplier reported adjusted earnings of 26 cents per share. Revenue rose by 4% year-over-year to $589 million.

Analysts expected Brocade to report earnings of 24 cents per share on revenue of $575.56 million for the most recent quarter.

The company projected earnings of 23 cents per share to 25 cents per share for the fiscal 2016 first quarter. Brocade also projected revenue of $550 million to $570 million. 

Analysts are expecting the company to report earnings of 27 cents per share on revenue of $583 million for the fiscal first quarter.

So far today, 16.93 million shares of Brocade have traded, versus its 30-day average of 3.92 million shares.

Separately, TheStreet Ratings team rates BROCADE COMMUNICATIONS SYS as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:

We rate BROCADE COMMUNICATIONS SYS (BRCD) 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, notable return on equity, attractive valuation levels and growth in earnings per share. We feel its strengths outweigh the fact that the company shows weak operating cash flow.

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

  • The revenue growth came in higher than the industry average of 9.4%. Since the same quarter one year prior, revenues slightly increased by 1.2%. This growth in revenue appears to have trickled down to the company's bottom line, improving 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 3.09, which clearly demonstrates the ability to cover short-term cash needs.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Communications Equipment industry and the overall market, BROCADE COMMUNICATIONS SYS's return on equity exceeds that of both the industry average and the S&P 500.
  • BROCADE COMMUNICATIONS SYS has improved earnings per share by 5.0% 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 year. 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 ($1.00 versus $0.54).
  • You can view the full analysis from the report here: BRCD

Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of Jim Cramer, TheStreet or any of its contributors.