How Will Telecom Italia (TI) Stock Respond To Possible Alliance With Vivendi (VIVHY) In Brazil?

NEW YORK (TheStreet) -- Telecom Italia (TI), which is Italy’s largest phone carrier, said it's in talks with Vivendi (VIVHY) about an alliance that would integrate their Brazilian units, Bloomberg reports.

Shares of Telecom Italia are slightly lower at $10.83, while Vivendi is up 3.37% to $26.40.

TheStreet Ratings team rates TELECOM ITALIA SPA - NEW as a Sell with a ratings score of D+. TheStreet Ratings Team has this to say about their recommendation:

"We rate TELECOM ITALIA SPA - NEW (TI) a SELL. This is driven by multiple weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its unimpressive growth in net income, generally high debt management risk and weak operating cash flow."

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

  • 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 Diversified Telecommunication Services industry. The net income has significantly decreased by 34.4% when compared to the same quarter one year ago, falling from $466.50 million to $305.85 million.
  • Although TI's debt-to-equity ratio of 2.09 is very high, it is currently less than that of the industry average.
  • Net operating cash flow has significantly decreased to $483.57 million or 53.64% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Diversified Telecommunication Services industry and the overall market, TELECOM ITALIA SPA - NEW's return on equity significantly trails that of both the industry average and the S&P 500.
  • TI, with its decline in revenue, slightly underperformed the industry average of 1.8%. Since the same quarter one year prior, revenues slightly dropped by 4.6%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • You can view the full analysis from the report here: TI Ratings Report

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