NEW YORK (TheStreet) -- Headwaters  (HW was rising 15.23% to $12.18 on Tuesday after the company reported first-quarter earnings that beat analysts' expectations.

Headwaters, which provides goods and services to the construction industry, reported earnings per share of 5 cents, which surpassed analysts' expectations of a loss of 2 cents per share. Revenues also rose 10.7% year-over-year to $165.6 million, which beat the analysts' estimates of $159.61 million.

Headwaters also raised its adjusted EBIDTA guidance for the fiscal year 2014 to a range of $130 million to $145 million from a previous range of $125 million to $140 million.

"We had a particularly strong October, leading to combined Adjusted EBITDA growth of 26% in our light and heavy construction materials segments. While the trim board product line that we acquired last year was accretive, our Adjusted EBITDA growth was primarily organic," said Chairman and CEO Kirk A. Benson in the company's statement. "We anticipate 2014 margin improvement year-over-year in both our light and heavy segments, and our first quarter was a solid start with combined margin improvement of more than 170 basis points."

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

"We rate HEADWATERS INC (HW) 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, 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 poor profit margins and generally higher debt management risk."

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

  • The revenue growth came in higher than the industry average of 6.7%. Since the same quarter one year prior, revenues rose by 13.1%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • HEADWATERS INC 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 two years. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, HEADWATERS INC turned its bottom line around by earning $0.11 versus -$0.44 in the prior year. This year, the market expects an improvement in earnings ($0.31 versus $0.11).
  • Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. Despite the fact that it has already risen in the past year, there is currently no conclusive evidence that warrants the purchase or sale of this stock.
  • The debt-to-equity ratio is very high at 5.41 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, HW's quick ratio is somewhat strong at 1.25, demonstrating the ability to handle short-term liquidity needs.
  • The gross profit margin for HEADWATERS INC is currently lower than what is desirable, coming in at 33.73%. It has decreased from the same quarter the previous year. Regardless of the weak results of the gross profit margin, the net profit margin of 4.76% is above that of the industry average.
  • You can view the full analysis from the report here: HW Ratings Report