NEW YORK (TheStreet) -- Alcatel-Lucent (ALU), in line with its plan to turn the floundering company around, will seek a new round of refinancing. The public offering of 955 million euros ($1.3 billion) of stock aims to strengthen its equity and provide greater financial flexibility, the French telecom company said in a statement.
The sale of around 460 million shares at 2.10 euros apiece is significantly discounted from the 2.90 euros the shares are currently trading at on the Euronext Paris exchange. The offering has not been made available to U.S. shareholders.
The Paris-based company also will launch a $750 million high-yield bond issuance and implement a new syndicated revolving credit facility worth 500 million euros.
After doubts over whether the company could spark a recovery, Alcatel-Lucent reported better-than-expected third-quarter financials on Thursday, sending shares soaring 16.1% on the New York Stock Exchange. The company managed to narrow losses to 200 million euros from 316 million euros a year earlier. Revenue of 3.67 billion euros ($5.05 billion) increased 7% year over year, driven by a 14% increase in North American sales.
Analysts surveyed by Thomson Reuters had expected a net loss of 139.4 million euros on revenue of 3.6 billion euros.
CEO Michel Combes has been making aggressive moves to turn the company around. By 2015, the phone equipment maker will have cut 10,000 jobs, saving 1 billion euros and reducing fixed costs by more than 15%.
In premarket trading Monday, shares were 0.51% lower to $3.87.
TheStreet Ratings team rates Alcatel-Lucent as a Sell with a ratings score of D. TheStreet Ratings Team has this to say about its recommendation:
"We rate ALCATEL-LUCENT (ALU) a SELL. This is driven by a few notable weaknesses, 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 deteriorating net income, generally high debt management risk, disappointing return on equity and feeble growth in its earnings per share."
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 Communications Equipment industry. The net income has significantly decreased by 123.2% when compared to the same quarter one year ago, falling from -$518.9 million to -$1,158.23 million.
- The debt-to-equity ratio is very high at 3.91 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with the unfavorable debt-to-equity ratio, ALU maintains a poor quick ratio of 0.99, which illustrates the inability to avoid short-term cash problems.
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Communications Equipment industry and the overall market, ALCATEL-LUCENT's return on equity significantly trails that of both the industry average and the S&P 500.
- ALCATEL-LUCENT has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has reported a trend of declining earnings per share over the past two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, ALCATEL-LUCENT swung to a loss, reporting -$1.35 a share vs. 37 cents a share in the prior year. This year, the market expects an improvement in earnings (-44 cents vs. -$1.35).
- 36.57% is the gross profit margin for ALCATEL-LUCENT which we consider to be strong. Regardless of ALU's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, ALU's net profit margin of -24.32% significantly underperformed when compared to the industry average.
- You can view the full analysis from the report here: ALU Ratings Report