Why Iridium Communications (IRDM) Stock Is Slipping Today

NEW YORK (TheStreet) -- Iridium Communications (IRDM) stock is sliding after the satellite communications operator announced an offering of common shares and convertible preferred stock.

By late afternoon, shares had dropped 4% to $7.32.

In a statement, the company said it would sell $45 million worth of common stock and aggregate gross proceeds of $125 million in its convertible series B share offering. 

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Virginia-based Iridium said it intends to use net proceeds for general corporate purposes, which may include "capital expenditures, including development and deployment of the Iridium NEXT system, working capital and general and administrative expenses."

Raymond JamesDeutsche Bank and William Blair will act as as joint book-running managers for the common stock offering. Deutsche Bank and Raymond James are acting as joint book-running managers for the convertible preferred stock offering, while Canaccord Genuity and Societe Generale are acting as co-managers. 

TheStreet Ratings team rates IRIDIUM COMMUNICATIONS INC as a Buy with a ratings score of B-. TheStreet Ratings Team has this to say about their recommendation:

"We rate IRIDIUM COMMUNICATIONS INC (IRDM) a BUY. This is driven by a few notable 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 revenue growth, largely solid financial position with reasonable debt levels by most measures, increase in stock price during the past year and expanding profit margins. We feel these strengths outweigh the fact that the company has had sub par growth in net income."

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

  • IRDM's revenue growth has slightly outpaced the industry average of 2.3%. Since the same quarter one year prior, revenues slightly increased by 6.4%. 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.
  • Even though the current debt-to-equity ratio is 1.11, it is still below the industry average, suggesting that this level of debt is acceptable within the Diversified Telecommunication Services industry. Even though the debt-to-equity ratio shows mixed results, the company's quick ratio of 3.14 is very high and demonstrates very strong liquidity.
  • Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • The gross profit margin for IRIDIUM COMMUNICATIONS INC is currently very high, coming in at 71.09%. Regardless of IRDM's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, IRDM's net profit margin of 15.86% compares favorably to the industry average.
  • IRIDIUM COMMUNICATIONS INC's earnings per share declined by 10.0% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past year. However, we anticipate this trend reversing over the coming year. During the past fiscal year, IRIDIUM COMMUNICATIONS INC reported lower earnings of $0.72 versus $0.82 in the prior year. This year, the market expects an improvement in earnings ($0.78 versus $0.72).

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