Brocade Communications Systems (BRCD) Stock Falls Despite Positive Quarter

NEW YORK (TheStreet) -- Brocade Communications Systems (BRCD) was falling 3.5% to $8.35 Friday despite beating analysts' estimates for the second quarter and guiding in-line with estimates for the third quarter.

For the second quarter Brocade reported earnings of 19 cents a share, beating the Capital IQ Consensus Estimates of 18 cents a share by 1 cent. Revenue fell -0.3% from the year-ago quarter to $537 million, higher than analysts' expected $531.5 million.

Looking forward to the third quarter Brocade expects revenue of $525 million to $545 million, while analysts expect revenue of $531.7 million for the quarter. The company sees earnings of 18 cents to 20 cents a share in the quarter, compared to analysts' estimates of 19 cents a share.

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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, impressive record of earnings per share growth, compelling growth in net income, largely solid financial position with reasonable debt levels by most measures and attractive valuation levels. Although no company is perfect, currently we do not see any significant weaknesses which are likely to detract from the generally positive outlook."

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

  • Powered by its strong earnings growth of 460.00% and other important driving factors, this stock has surged by 50.71% over the past year, outperforming the rise in the S&P 500 Index during the same period. Turning to the future, naturally, any stock can fall in a major bear market. However, in almost any other environment, the stock should continue to move higher despite the fact that it has already enjoyed nice gains in the past year.
  • BROCADE COMMUNICATIONS SYS 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. 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 ($0.84 versus $0.45).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Communications Equipment industry. The net income increased by 480.5% when compared to the same quarter one year prior, rising from -$21.26 million to $80.88 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 2.48, which demonstrates the ability of the company to cover short-term liquidity needs.
  • You can view the full analysis from the report here: BRCD Ratings Report

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Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

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