Why Alcatel Lucent (ALU) Stock Is Climbing On Wednesday

NEW YORK (TheStreet) -- Shares of Alcatel Lucent SA (ALU) are higher by 4.67% to $3.69 at the start of trading this morning following a ratings upgrade to "overweight" from "neutral" at JPMorgan (JPM).

The firm said it raised its rating on the service provider solutions company based on a valuation call due to a recent pull back in shares.

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Separately, TheStreet Ratings team rates ALCATEL-LUCENT as a Hold with a ratings score of C-. TheStreet Ratings Team has this to say about their recommendation:

"We rate ALCATEL-LUCENT (ALU) 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, solid stock price performance and impressive record of earnings per share growth. However, as a counter to these strengths, we find that the company has favored debt over equity in the management of its balance sheet."

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

  • ALU's revenue growth has slightly outpaced the industry average of 2.6%. Since the same quarter one year prior, revenues slightly increased by 4.0%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Powered by its strong earnings growth of 73.68% and other important driving factors, this stock has surged by 108.09% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, our hold rating indicates that we do not recommend additional investment in this stock despite its gains in the past year.
  • 36.79% is the gross profit margin for ALCATEL-LUCENT which we consider to be strong. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of -2.46% is in-line with the industry average.
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Communications Equipment industry and the overall market, ALCATEL-LUCENT's return on equity significantly trails that of both the industry average and the S&P 500.
  • Currently the debt-to-equity ratio of 1.93 is quite high overall and when compared to the industry average, suggesting that the current management of debt levels should be re-evaluated. Even though the debt-to-equity ratio is weak, ALU's quick ratio is somewhat strong at 1.03, demonstrating the ability to handle short-term liquidity needs.
  • You can view the full analysis from the report here: ALU Ratings Report
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