3 Stocks Pushing The Telecommunications Industry Lower

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The Telecommunications industry as a whole closed the day up 0.4% versus the S&P 500, which was down 0.1%. Laggards within the Telecommunications industry included Otelco ( OTEL), down 2.2%, Voltari ( VLTC), down 1.9%, Ikanos Communications ( IKAN), down 12.5%, Hong Kong Television Network ( HKTV), down 3.3% and Communications Systems ( JCS), down 1.6%.

TheStreet Ratings Group would like to highlight 3 stocks that pushed the industry lower today:

Oi ( OIBR) is one of the companies that pushed the Telecommunications industry lower today. Oi was down $0.03 (4.2%) to $0.64 on light volume. Throughout the day, 11,759,833 shares of Oi exchanged hands as compared to its average daily volume of 16,271,200 shares. The stock ranged in price between $0.62-$0.65 after having opened the day at $0.62 as compared to the previous trading day's close of $0.67.

Oi S.A., through its subsidiaries, provides integrated telecommunication services for residential customers, companies, and governmental agencies in Brazil. It operates in three segments: Fixed-Line and Data Transmission Services, Mobile Services, and Other Services. Oi has a market cap of $5.6 billion and is part of the technology sector. Shares are down 57.9% year-to-date as of the close of trading on Friday. Currently there is 1 analyst who rates Oi a buy, 1 analyst rates it a sell, and 1 rates it a hold.

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TheStreet Ratings rates Oi as a sell. The company's weaknesses can be seen in multiple areas, such as its feeble growth in its earnings per share, unimpressive growth in net income, generally high debt management risk, disappointing return on equity and generally disappointing historical performance in the stock itself.

Highlights from TheStreet Ratings analysis on OIBR go as follows:

  • OI SA's earnings per share declined by 50.0% in the most recent quarter compared to the same quarter a year ago. Earnings per share have declined over the last two years. We anticipate that this should continue in the coming year. During the past fiscal year, OI SA reported lower earnings of $0.39 versus $0.79 in the prior year. For the next year, the market is expecting a contraction of 105.1% in earnings (-$0.02 versus $0.39).
  • 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 45.6% when compared to the same quarter one year ago, falling from -$67.24 million to -$97.89 million.
  • Although OIBR's debt-to-equity ratio of 2.15 is very high, it is currently less than that of the industry average. Along with the unfavorable debt-to-equity ratio, OIBR maintains a poor quick ratio of 0.89, which illustrates the inability to avoid short-term cash problems.
  • Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. In comparison to the other companies in the Diversified Telecommunication Services industry and the overall market, OI SA's return on equity is significantly below that of the industry average and is below that of the S&P 500.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 57.60%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 50.00% compared to the year-earlier quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.

You can view the full analysis from the report here: Oi Ratings Report

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At the close, Communications Systems ( JCS) was down $0.18 (1.6%) to $11.11 on light volume. Throughout the day, 3,146 shares of Communications Systems exchanged hands as compared to its average daily volume of 11,100 shares. The stock ranged in price between $10.74-$11.27 after having opened the day at $11.27 as compared to the previous trading day's close of $11.29.

Communications Systems, Inc., together with its subsidiaries, manufactures and sells modular connecting and wiring devices, digital subscriber line filters, structured wiring systems, and media and rate conversion products primarily in North America, Europe, the Middle East, and Africa. Communications Systems has a market cap of $97.6 million and is part of the technology sector. Shares are up 1.4% year-to-date as of the close of trading on Friday.

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TheStreet Ratings rates Communications Systems as a hold. 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 and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including feeble growth in the company's earnings per share, deteriorating net income and disappointing return on equity.

Highlights from TheStreet Ratings analysis on JCS go as follows:

  • JCS's revenue growth has slightly outpaced the industry average of 3.4%. Since the same quarter one year prior, revenues slightly increased by 4.0%. 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.
  • JCS's debt-to-equity ratio is very low at 0.01 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with this, the company maintains a quick ratio of 2.77, which clearly demonstrates the ability to cover short-term cash needs.
  • 38.09% is the gross profit margin for COMMUNICATIONS SYSTEMS INC 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, JCS's net profit margin of 4.32% significantly trails the industry average.
  • The company, on the basis of change in net income from the same quarter one year ago, has underperformed when compared to that of the S&P 500 and greatly underperformed compared to the Communications Equipment industry average. The net income has decreased by 12.3% when compared to the same quarter one year ago, dropping from $1.64 million to $1.44 million.
  • Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Communications Equipment industry and the overall market, COMMUNICATIONS SYSTEMS INC's return on equity significantly trails that of both the industry average and the S&P 500.

You can view the full analysis from the report here: Communications Systems Ratings Report

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Ikanos Communications ( IKAN) was another company that pushed the Telecommunications industry lower today. Ikanos Communications was down $0.05 (12.5%) to $0.33 on average volume. Throughout the day, 130,091 shares of Ikanos Communications exchanged hands as compared to its average daily volume of 166,500 shares. The stock ranged in price between $0.31-$0.39 after having opened the day at $0.38 as compared to the previous trading day's close of $0.38.

Ikanos Communications, Inc. designs, develops, markets, and sells semiconductors and integrated firmware products for the digital home worldwide. It offers various digital subscriber line (DSL) processors for a range of power carrier infrastructure and customer premises equipment devices. Ikanos Communications has a market cap of $37.7 million and is part of the technology sector. Shares are down 68.3% year-to-date as of the close of trading on Friday. Currently there are 2 analysts who rate Ikanos Communications a buy, no analysts rate it a sell, and none rate it a hold.

TheStreet Ratings rates Ikanos Communications as a sell. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, disappointing return on equity, weak operating cash flow and generally disappointing historical performance in the stock itself.

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Highlights from TheStreet Ratings analysis on IKAN go 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 Semiconductors & Semiconductor Equipment industry. The net income has significantly decreased by 42.2% when compared to the same quarter one year ago, falling from -$8.67 million to -$12.33 million.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Semiconductors & Semiconductor Equipment industry and the overall market, IKANOS COMMUNICATIONS INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • Net operating cash flow has significantly decreased to -$10.57 million or 61.95% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • IKAN's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 70.16%, which is also worse than the performance of the S&P 500 Index. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
  • IKANOS COMMUNICATIONS INC reported flat earnings per share in the most recent quarter. The company has reported a trend of declining earnings per share over the past two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, IKANOS COMMUNICATIONS INC reported poor results of -$0.40 versus -$0.24 in the prior year. This year, the market expects an improvement in earnings (-$0.36 versus -$0.40).

You can view the full analysis from the report here: Ikanos Communications Ratings Report

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

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