Story updated at 9:45 a.m.to reflect market activity.
Shares of Alcatel Lucent gained 0.7% to $4.15 in morning trading.
The analyst firm set a price target of $5.50 for the company. Alcatel Lucent should benefit from a turnaround in capital spending according to BMO.
Separately, TheStreet Ratings team rates ALCATEL-LUCENT as a Hold with a ratings score of C-. TheStreet Ratings Team has this to say about their recommendation:
"We rate ALCATEL-LUCENT (ALU) 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 solid stock price performance, impressive record of earnings per share growth and compelling growth in net income. However, as a counter to these strengths, we also find weaknesses including weak operating cash flow and generally higher debt management risk."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Powered by its strong earnings growth of 105.37% and other important driving factors, this stock has surged by 196.47% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, our hold rating indicates that we do not recommend additional investment in this stock despite its gains in the past year.
- ALCATEL-LUCENT 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. This trend suggests that the performance of the business is improving. During the past fiscal year, ALCATEL-LUCENT continued to lose money by earning -$0.80 versus -$1.56 in the prior year. This year, the market expects an improvement in earnings ($0.05 versus -$0.80).
- 38.39% is the gross profit margin for ALCATEL-LUCENT which we consider to be strong. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, ALU's net profit margin of 2.63% significantly trails the industry average.
- The debt-to-equity ratio is very high at 2.10 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Even though the debt-to-equity ratio is weak, ALU's quick ratio is somewhat strong at 1.07, demonstrating the ability to handle short-term liquidity needs.
- Net operating cash flow has declined marginally to $670.46 million or 1.08% 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.
- You can view the full analysis from the report here: ALU Ratings Report
Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.