Why Brocade Communications (BRCD) Hit a One-Year High Today

NEW YORK (TheStreet) -- Brocade Communications  (BRCD) hit a one-year high of $9.92 Friday after the networking solutions company announced second-quarter results that surpassed analysts' expectations.

Sales fell 4% year-over-year to $565 million, while non-GAAP earnings per share rose 14% to 24 cents. This surpassed analysts' expectations of 20 cents per share on revenue of $550 million.

Brocade also issued second-quarter guidance for revenue in the range of $520 million to $540 million and non-GAAP EPS of 17 to 19 cents. The high end of this guidance aligned with the consensus estimate.

"Brocade achieved solid results in Q1, exceeding our outlook for revenue and profitability," said CEO Lloyd Carney in the company's statement. "This is a transformational year for Brocade and we remain committed to our mission to be the network provider of choice to the world's data centers."

Must Read: Brocade And Emulex Collaborate On Gen 6 Fibre Channel Solutions

TheStreet Ratings team rates BROCADE COMMUNICATIONS SYS as a "buy" with a ratings score of B+. TheStreet Ratings Team has this to say about their recommendation:

"We rate BROCADE COMMUNICATIONS SYS (BRCD) a BUY. This is driven by a number of strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its solid stock price performance, growth in earnings per share, increase in net income, largely solid financial position with reasonable debt levels by most measures and expanding profit margins. We feel these strengths outweigh the fact that the company shows weak operating cash flow."

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

  • Powered by its strong earnings growth of 27.27% and other important driving factors, this stock has surged by 64.62% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, although almost any stock can fall in a broad market decline, BRCD should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • BROCADE COMMUNICATIONS SYS has improved earnings per share by 27.3% 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. During the past fiscal year, BROCADE COMMUNICATIONS SYS increased its bottom line by earning $0.45 versus $0.40 in the prior year. This year, the market expects an improvement in earnings ($0.82 versus $0.45).
  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and the Communications Equipment industry average. The net income increased by 18.9% when compared to the same quarter one year prior, going from $54.00 million to $64.23 million.
  • Although BRCD's debt-to-equity ratio of 0.26 is very low, it is currently higher than that of the industry average. To add to this, BRCD has a quick ratio of 2.21, which demonstrates the ability of the company to cover short-term liquidity needs.
  • The gross profit margin for BROCADE COMMUNICATIONS SYS is currently very high, coming in at 70.62%. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, BRCD's net profit margin of 11.49% significantly trails the industry average.
  • You can view the full analysis from the report here: BRCD Ratings Report

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