Will This DOD Contract Help Liquidity Services (LQDT) Stock Today?

NEW YORK (TheStreet) -- Liquidity Services Inc. (LQDT)  announced on Wednesday afternoon that it was awarded a new $9 billion surplus contract with the Defense Department.

"Based on historical volumes of inventory under our current DOD surplus contract, we would expect to handle an estimated $9 billion of original acquisition value of property over the contract performance period of our new contract," the company said. 

Liquidity Services, which is a market place for surplus and salvage assets, said the contract ensures it will remain the primary channel for the sale of DOD usable surplus properties, in key assets including aerospace, audio and video, and boats and other marine vessels.

The award comes from the DOD's Defense Logistics Agency Disposition Services and is for two years, beginning in the early part of 2015.

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Terms of the contract say Liquidity will pay the DLA approximately 4.35% of the DOD's original acquisition value for all referred items, while retaining 100% of the profit from the resale of the property.

Shares of Liquidity Services are flat in pre-market trading on Thursday.

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

"We rate LIQUIDITY SERVICES INC (LQDT) 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 largely solid financial position with reasonable debt levels by most measures and reasonable valuation levels. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, feeble growth in the company's earnings per share and deteriorating net income."

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

  • LQDT has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.05, which illustrates the ability to avoid short-term cash problems.
  • LQDT, with its decline in revenue, underperformed when compared the industry average of 11.5%. Since the same quarter one year prior, revenues slightly dropped by 1.5%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • LIQUIDITY SERVICES INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. Earnings per share have declined over the last year. We anticipate that this should continue in the coming year. During the past fiscal year, LIQUIDITY SERVICES INC reported lower earnings of $1.26 versus $1.47 in the prior year. For the next year, the market is expecting a contraction of 10.3% in earnings ($1.13 versus $1.26).
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Internet Software & Services industry. The net income has significantly decreased by 55.6% when compared to the same quarter one year ago, falling from $12.70 million to $5.63 million.
  • You can view the full analysis from the report here: LQDT Ratings Report
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