Story updated at 9:55 a.m. to reflect market activity.
EMC stock fell -0.9% to $29.40 in morning trading.
The analyst firm reiterated its "buy" rating for the stock. EMC's VMware (VMW) acquisition still has unrealized value potential according to UBS analysts Steven Milunovich and John Roy, adding that spinning off the company wouldn't make sense.
"EMC and VMware have been run independently," the analysts wrote. "Spin-offs, of which there are few in tech, work when the spinee has been overshadowed by the parent, which is not the case here. We think the Federation structure, established less than 18 months ago, deserves a chance as it still is early."
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Separately, TheStreet Ratings team rates EMC CORP/MA as a Buy with a ratings score of B+. TheStreet Ratings Team has this to say about their recommendation:
"We rate EMC CORP/MA (EMC) a BUY. This is driven by some important positives, 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, expanding profit margins, good cash flow from operations and increase in stock price during the past year. 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:
- Despite its growing revenue, the company underperformed as compared with the industry average of 8.6%. Since the same quarter one year prior, revenues slightly increased by 4.7%. 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.
- Although EMC's debt-to-equity ratio of 0.25 is very low, it is currently higher than that of the industry average. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.11, which illustrates the ability to avoid short-term cash problems.
- The gross profit margin for EMC CORP/MA is rather high; currently it is at 69.98%. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, EMC's net profit margin of 10.00% significantly trails the industry average.
- Net operating cash flow has slightly increased to $1,254.00 million or 2.10% when compared to the same quarter last year. Despite an increase in cash flow, EMC CORP/MA's cash flow growth rate is still lower than the industry average growth rate of 34.18%.
- EMC CORP/MA's earnings per share declined by 12.5% 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, EMC CORP/MA increased its bottom line by earning $1.33 versus $1.23 in the prior year. This year, the market expects an improvement in earnings ($1.91 versus $1.33).
- You can view the full analysis from the report here: EMC Ratings Report