Why RealD (RLD) Is Up Today

NEW YORK (TheStreet) -- RealD (RLD) rose 9.1% to $9.43 Thursday following quarterly results that beat analyst estimates for earnings and revenue.

For its fiscal third quarter, the 3D technology company posted a loss of 1 cent a share, beating Capital IQ Consensus Estimate of a loss of 9 cents a share. RealD reported revenue of $55.4 million, compared to analyst estimates of $50.6 million.

The company said both box office and licensing revenue increased from the year-ago period thanks to the film Gravity. The film delivered "over $300 million in RealD box office to-date," CEO Michael V. Lewis said in a statement.

Must read: RealD Inc. Reports Third Quarter Fiscal Year 2014 Financial Results

TheStreet Ratings team rates REALD INC as a Sell with a ratings score of D. TheStreet Ratings Team has this to say about their recommendation:

"We rate REALD INC (RLD) 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 feeble growth in its earnings per share, deteriorating net income, disappointing return on equity, weak operating cash flow and generally disappointing historical performance in the stock itself."

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

  • REALD INC's earnings per share declined by 12.5% in the most recent quarter compared to the same quarter a year ago. Earnings per share have declined over the last two years. We anticipate that this should continue in the coming year. During the past fiscal year, REALD INC swung to a loss, reporting -$0.20 versus $0.65 in the prior year. For the next year, the market is expecting a contraction of 125.0% in earnings (-$0.45 versus -$0.20).
  • 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 Electronic Equipment, Instruments & Components industry. The net income has decreased by 11.4% when compared to the same quarter one year ago, dropping from -$4.17 million to -$4.65 million.
  • 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 Electronic Equipment, Instruments & Components industry and the overall market, REALD INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • Net operating cash flow has decreased to $16.66 million or 26.87% when compared to the same quarter last year. In conjunction, when comparing current results to the industry average, REALD INC has marginally lower results.
  • Reflecting the weaknesses we have cited, including the decline in the company's earnings per share, RLD has underperformed the S&P 500 Index, declining 19.16% from its price level of one year ago. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.

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