Why KEYW (KEYW) Is Up Today

NEW YORK (TheStreet) -- KEYW Holding (KEYW) gained 4.7% to $16.59 Wednesday following an earnings report that beat analysts' earnings estimate.

For the fourth quarter the computer hardware and software company posted earnings of 12 cents a share. Analysts surveyed by Thomson Reuters expected a loss of 4 cents a share for the quarter. The company missed estimates for revenue, however, reporting a 7% drop in sales to $68.8 million when analysts expected $72.2 million for the quarter.

KEYW says the government shutdown and sequestration are responsible for the decrease in revenue in the fourth quarter.

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

"We rate KEYW HOLDING CORP (KEYW) 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 robust revenue growth, solid stock price performance and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and weak operating cash flow."

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

  • The revenue growth came in higher than the industry average of 8.3%. Since the same quarter one year prior, revenues rose by 28.6%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • Compared to its closing price of one year ago, KEYW's share price has jumped by 26.88%, exceeding the performance of the broader market during that same time frame. Although KEYW had significant growth over the past year, our hold rating indicates that we do not recommend additional investment in this stock at the current time.
  • KEYW's debt-to-equity ratio is very low at 0.28 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.89 is somewhat weak and could be cause for future problems.
  • 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 Aerospace & Defense industry. The net income has significantly decreased by 1708.8% when compared to the same quarter one year ago, falling from $0.34 million to -$5.50 million.
  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Aerospace & Defense industry and the overall market, KEYW HOLDING CORP's return on equity significantly trails that of both the industry average and the S&P 500.

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