
Ericsson (ERIC) Stock Falls on Revised Growth Outlook
NEW YORK (TheStreet) -- Ericsson (ERIC) - Get Report stock is falling, down 6.61% to $9.33 in early afternoon trading on Tuesday, after the communications technology company lowered its growth forecast.
Shares fell on Tuesday after Ericsson cut its projections for growth in the wireless-networking equipment market, Bloomberg reports.
The company predicted the market will grow 1% to 3% through 2018, versus its previous estimate of 2% to 4% through 2017.
Additionally, the Swedish company announced yesterday that it was forming a partnership with Cisco Systems (CSCO).
The partnership will enable Cisco and Ericsson engineers to team up, focusing first on service providers and the enterprise segment, the company said.
The deal will generate up to $1 billion in revenue by 2018 for both Ericsson and Cisco.
"Cisco brings their leading position in IP and a strong presence in enterprise," Ericsson CEO Hans Vestberg said in a statement. "We bring our leadership in mobile networks, our strength in global services, and strong relationships with the world's leading service providers."
Separately, TheStreet Ratings team rates ERICSSON as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:
We rate ERICSSON (ERIC) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. 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 and reasonable valuation levels. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself and disappointing return on equity.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- ERIC's revenue growth has slightly outpaced the industry average of 9.6%. Since the same quarter one year prior, revenues slightly increased by 0.3%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- ERIC's debt-to-equity ratio is very low at 0.19 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.45, which illustrates the ability to avoid short-term cash problems.
- ERICSSON has improved earnings per share by 22.2% 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, ERICSSON reported lower earnings of $0.45 versus $0.58 in the prior year. This year, the market expects an improvement in earnings ($0.63 versus $0.45).
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Communications Equipment industry and the overall market on the basis of return on equity, ERICSSON has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
- ERIC has underperformed the S&P 500 Index, declining 15.76% from its price level of one year ago. Looking ahead, other than the push or pull of the broad market, we do not see anything in the company's numbers that may help reverse the decline experienced over the past 12 months. Despite the past decline, the stock is still selling for more than most others in its industry.
- You can view the full analysis from the report here: ERIC
Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of Jim Cramer, TheStreet or any of its contributors.








