ShoreTel (SHOR) Drops After Second-Quarter Results

NEW YORK (TheStreet) -- ShoreTel  (SHOR) fell 11.5% to $8.31 on Friday despite the company's announcement of improved second-quarter results.

The communications company reported a total revenue of $84.5 million, up 13% from the same period one year earlier. Non-GAAP income was 3.2 million, or 5 cents a share, compared to a non-GAAP net loss of $2.6 million, or 4 cents a share, in the second quarter of fiscal 2013. The GAAP net loss was $0.9 million, or 2 cents a share, compared to $10.4 million, or 18 cents a share, in the same period one year earlier.

"The positive second quarter results validate the ongoing value of our business model which led to our revenue growth, non-GAAP profitability and significant cash flow from operations," said president and CEO Don Joos in a company statement. "We have strategically positioned the company for the growth opportunities in our industry and we remain focused on executing key initiatives including our enhanced channel partner program, sales team integration and product launches."

TheStreet Ratings team rates SHORETEL INC as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:

"We rate SHORETEL INC (SHOR) 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 compelling growth in net income, revenue growth and solid stock price performance. However, as a counter to these strengths, we find that the company's return on equity has been disappointing."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • 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 87.1% when compared to the same quarter one year prior, rising from -$8.04 million to -$1.04 million.
  • Despite its growing revenue, the company underperformed as compared with the industry average of 22.4%. Since the same quarter one year prior, revenues rose by 12.4%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • SHORETEL INC reported significant earnings per share improvement 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, SHORETEL INC reported poor results of -$0.45 versus -$0.41 in the prior year. This year, the market expects an improvement in earnings ($0.19 versus -$0.45).
  • The gross profit margin for SHORETEL INC is rather high; currently it is at 65.87%. Regardless of SHOR's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, SHOR's net profit margin of -1.22% significantly underperformed when compared to the industry average.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Communications Equipment industry and the overall market, SHORETEL INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • You can view the full analysis from the report here: SHOR Ratings Report

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