Why Federal-Mogul (FDML) Stock Is Falling Today

NEW YORK (TheStreet) -- Shares of Federal-Mogul Holdings Corp. (FDML) declined -10.18% to $16.68 by mid-day today. 

The auto parts supplier reported first quarter net income of $40 million, or 27 cents a share, versus a loss of $34 million, or 34 cents, a year ago. Sales increased 7.2% to $1.78 billion.

However, three analysts surveyed by Bloomberg estimated a per share profit of 33 cents on sales of $1.81 billion.

The company is majority controlled by Carl Icahn.

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TheStreet Ratings team rates FEDERAL-MOGUL HOLDINGS CORP as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:

"We rate FEDERAL-MOGUL HOLDINGS CORP (FDML) 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 impressive record of earnings per share growth, compelling growth in net income and revenue growth. However, as a counter to these strengths, we also find weaknesses including generally higher debt management risk and poor profit margins."

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

  • FEDERAL-MOGUL HOLDINGS CORP 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, FEDERAL-MOGUL HOLDINGS CORP turned its bottom line around by earning $0.89 versus -$0.99 in the prior year. This year, the market expects an improvement in earnings ($1.28 versus $0.89).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Auto Components industry. The net income increased by 76.3% when compared to the same quarter one year prior, rising from -$80.00 million to -$19.00 million.
  • The gross profit margin for FEDERAL-MOGUL HOLDINGS CORP is rather low; currently it is at 18.02%. Regardless of FDML's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of -1.12% trails the industry average.
  • Currently the debt-to-equity ratio of 1.74 is quite high overall and when compared to the industry average, suggesting that the current management of debt levels should be re-evaluated. To add to this, FDML has a quick ratio of 0.66, this demonstrates the lack of ability of the company to cover short-term liquidity needs.
  • You can view the full analysis from the report here: FDML Ratings Report
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