NEW YORK (TheStreet) -- Ericsson (ERIC) - Get Telefonaktiebolaget LM Ericsson Sponsored ADR Class B Report shares are up 0.5% to $12.12 on Tuesday after the worlds largest wireless network equipment maker said that it is in contract talks with telecom giants AT&T (T) - Get AT&T Inc. Report and Verizon (VZ) - Get Verizon Communications Inc. Report to manage their networks, Bloomberg reports.
CEO Jean-Cleade Geha believes that the future of the industry lies with service providers outsourcing operations to companies like his.
The Swedish communications technology provider is looking to tap into a market for service management that totaled $273 billion in 2012, half of which was performed by the telecom companies themselves.
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TheStreet Ratings team rates ERICSSON as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:
"We rate ERICSSON (ERIC) a BUY. This is driven by a number of strengths, 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 impressive record of earnings per share growth, compelling growth in net income, largely solid financial position with reasonable debt levels by most measures, reasonable valuation levels and good cash flow from operations. 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:
- ERICSSON 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 year. We feel that this trend should continue. During the past fiscal year, ERICSSON increased its bottom line by earning $0.58 versus $0.28 in the prior year. This year, the market expects an improvement in earnings ($0.79 versus $0.58).
- 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 77.4% when compared to the same quarter one year prior, rising from $184.59 million to $327.41 million.
- Although ERIC's debt-to-equity ratio of 0.17 is very low, it is currently higher than that of the industry average. To add to this, ERIC has a quick ratio of 1.60, which demonstrates the ability of the company to cover short-term liquidity needs.
- Net operating cash flow has significantly increased by 419.15% to $1,452.05 million when compared to the same quarter last year. In addition, ERICSSON has also vastly surpassed the industry average cash flow growth rate of -10.85%.
- You can view the full analysis from the report here: ERIC Ratings Report