Nuance (NUAN) Stock Up Today

NEW YORK (TheStreet) -- Shares of Nuance Communications  (NUAN) jumped this afternoon, rising 6.6% to $15.94 at 2:25 p.m. EST. The Massachusetts-based software company provides speech and imaging applications and features activist investor Carl Icahn as one of its principal backers.

Oppenheimer maintained its "outperform" rating following the company's 8-K filings yesterday. In the filing Nuance announced that Janet Dillione, head of the company's health care unit, will be stepping down on March 21. The health division realized only 1% year-over-year revenue growth in the fourth quarter and a 7% decline overall. The health care division accounts for 46% of Nuance's revenue and 58% of its operational profit.

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Oppenheimer sees the change in management as positive. "Dillione has grown the healthcare business to ~$1B; however, execution has been hard to come by in the previous few quarters. Investors should view this news positively as NUAN has made some management team changes recently (i.e. replacing Bill Nelson with Bill Robbins as head of Worldwide Sales). This announcement should signal to investors that NUAN wants to bring more focus and execution to re-accelerate top-line growth."

Icahn increased his holdings in the company to 60.8 million shares last month and currently holds a 19% stake in the company.

TheStreet Ratings team rates NUANCE COMMUNICATIONS INC as a Hold with a ratings score of C-. TheStreet Ratings Team has this to say about their recommendation:

"We rate NUANCE COMMUNICATIONS INC (NUAN) 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, largely solid financial position with reasonable debt levels by most measures and expanding profit margins. 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:

  • Despite its growing revenue, the company underperformed as compared with the industry average of 10.1%. Since the same quarter one year prior, revenues slightly increased by 1.7%. 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.
  • NUAN's debt-to-equity ratio of 0.91 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Regardless of the somewhat mixed results with the debt-to-equity ratio, the company's quick ratio of 1.40 is sturdy.
  • 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 Software industry. The net income has significantly decreased by 150.8% when compared to the same quarter one year ago, falling from -$22.10 million to -$55.41 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 Software industry and the overall market, NUANCE COMMUNICATIONS INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • You can view the full analysis from the report here: NUAN Ratings Report
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