NEW YORK (TheStreet) -- Shares of ADT Corp. (ADT) - Get ADT, Inc. Report are up 4.71% to $31.15 in premarket trade after the company today reported its financial results for the second quarter of 2014.
Diluted earnings per share were 34 cents and includes a non-cash tax charge of $13 million related to Tyco's pending settlement with the IRS of a pre-separation tax liability.
Excluding this and other special items, diluted earnings per share was 49 cents.
This compares to diluted earnings per share excluding special items of 41 centas in the second quarter of 2013. Using the Company's cash tax rate, diluted earnings per share before special items was 69 cents.
Total revenue was $837 million, an increase of 1.9% compared to the second quarter of 2013. Recurring revenue, which made up 92% of total revenue in the quarter, was $773 million, up 2.2% compared to the same period last year and up 2.8% in constant currency.
EBITDA before special items increased by $22 million to $431 million, 5.4% higher than the prior year and EBITDA margin before special items was 51.5%, a 170 basis point improvement.
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 a number of negative factors, 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, weak operating cash flow and generally disappointing historical performance in the stock itself."
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 26.7% when compared to the same quarter one year ago, falling from $105.00 million to $77.00 million.
- The debt-to-equity ratio of 1.36 is relatively high when compared with the industry average, suggesting a need for better debt level management. Along with this, the company manages to maintain a quick ratio of 0.26, which clearly demonstrates the inability to cover short-term cash needs.
- Net operating cash flow has decreased to $335.00 million or 18.09% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
- Looking at the price performance of ADT's shares over the past 12 months, there is not much good news to report: the stock is down 31.78%, and it has underformed the S&P 500 Index. In addition, the company's earnings per share are lower today than 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.
- The gross profit margin for ADT CORP is currently very high, coming in at 86.53%. ADT has managed to maintain the strong profit margin since the same quarter of last year. Despite the mixed results of the gross profit margin, ADT's net profit margin of 9.17% compares favorably to the industry average.
- You can view the full analysis from the report here: ADT Ratings Report