Why Ericsson (ERIC) Stock Is Rising Today

NEW YORK (TheStreet) -- Ericsson (ERIC) shares are up 7.9% to $12.60 on Friday after the company reported its second quarter earnings results.

The Swedish communications technology provider reported a 15% year over year quarterly jump in sales to $8.03 billion, slightly ahead of analysts $8 billion estimates.

The company reported earnings of 16 cents per share, 1 cent better than analysts expected.

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TheStreet Ratings team rates ERICSSON as a Hold with a ratings score of C+. TheStreet Ratings Team has this to say about their recommendation:

"We rate ERICSSON (ERIC) 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 largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we find that the stock has had a generally disappointing performance in the past year."

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

  • ERICSSON 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 year. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, ERICSSON increased its bottom line by earning $0.58 versus $0.28 in the prior year. This year, the market expects an improvement in earnings ($0.79 versus $0.58).
  • 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 77.4% when compared to the same quarter one year prior, rising from $184.59 million to $327.41 million.
  • 41.60% is the gross profit margin for ERICSSON which we consider to be strong. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, ERIC's net profit margin of 4.46% significantly trails 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. When compared to other companies in the Communications Equipment industry and the overall market, ERICSSON's return on equity is below that of both the industry average and the S&P 500.
  • In its most recent trading session, ERIC 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. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
  • You can view the full analysis from the report here: ERIC Ratings Report
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