Why Brooks Automation (BRKS) Stock Is Gaining In Pre-Market Trading Today

NEW YORK (TheStreet) -- Brooks Automation (BRKS) shares are up 1.84% to $10.52 in pre-market trading on Monday after being upgraded to "buy" from "hold" by analysts at Stifel (SF).

The firm initiated a $13 price target on the shares, suggesting a 26% increase from the company's closing price on Friday.

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The upgraded outlook rests on the improved performance of the company's life sciences division.

"We are now comfortable with the company's growth prospects in its emerging life sciences business and as we have cited previously, we believe the growth in this area will be the key driver in the overall company's fortunes and the appreciation potential in the stock," said the firm.

Separately, TheStreet Ratings team rates BROOKS AUTOMATION INC as a Hold with a ratings score of C+. TheStreet Ratings Team has this to say about their recommendation:

"We rate BROOKS AUTOMATION INC (BRKS) 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 increase in net income. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity and relatively poor performance when compared with the S&P 500 during the past year."

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

  • The revenue growth came in higher than the industry average of 2.8%. Since the same quarter one year prior, revenues rose by 15.0%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • BRKS's debt-to-equity ratio is very low at 0.01 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, BRKS has a quick ratio of 1.94, which demonstrates the ability of the company to cover short-term liquidity needs.
  • BROOKS AUTOMATION INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, BROOKS AUTOMATION INC swung to a loss, reporting -$0.10 versus $2.07 in the prior year. This year, the market expects an improvement in earnings ($0.27 versus -$0.10).
  • In its most recent trading session, BRKS has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. We feel that the combination of its price rise over the last year and its current price-to-earnings ratio relative to its industry tend to reduce its upside potential.
  • 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 Semiconductors & Semiconductor Equipment industry and the overall market, BROOKS AUTOMATION 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: BRKS Ratings Report
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