Why ADT (ADT) Is Falling Today

NEW YORK (TheStreet) -- ADT (ADT) fell 16.7% to $31.50 on Thursday following a disappointing earnings report and a downgrade from Oppenheimer.

The security company reported earnings of 43 cents a share for its fiscal first quarter. In the same period the previous year, ADT posted earnings of 44 cents a share. Total revenue increased by 3.7% in the quarter to $839 million from $809 million.

In a statement, ADT CEO Naren Gursahaney said, "Customer growth did not meet our expectations this quarter and we have implemented actions, including improvements in our dealer channel and lead generation process, to regain subscriber traction in the future."

Oppenheier downgraded ADT to "perform" from "outperform."

TheStreet Ratings team rates ADT CORP (THE) as a Hold with a ratings score of C-. TheStreet Ratings Team has this to say about its recommendation:

"We rate ADT CORP (THE) (ADT) 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 revenue growth, growth in earnings per share and expanding profit margins. However, as a counter to these strengths, we find that the growth in the company's net income has been quite unimpressive."

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

  • ADT's revenue growth has slightly outpaced the industry average of 5.8%. Since the same quarter one year prior, revenues slightly increased by 4.2%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • ADT CORP (THE) has improved earnings per share by 12.5% 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, ADT CORP (THE) increased its bottom line by earning $1.88 versus $0.40 in the prior year. This year, the market expects an improvement in earnings ($2.08 versus $1.88).
  • ADT has underperformed the S&P 500 Index, declining 17.61% from its price level of one year ago.
  • When compared to other companies in the Commercial Services & Supplies industry and the overall market, ADT CORP (THE)'s return on equity is below that of both the industry average and the S&P 500.
  • The company, on the basis of net income growth from the same quarter one year ago, has underperformed when compared to that of the S&P 500 and greatly underperformed compared to the Commercial Services & Supplies industry average. The net income increased by 2.1% when compared to the same quarter one year prior, going from $94.00 million to $96.00 million.

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