NEW YORK (TheStreet) -- Shares of Neustar (NSR) were gaining 4% to $22.79 on heavy trading volume Thursday after the information services company announced a new share repurchase plan and despite the loss of a Federal Communication Commission contract.
Neustar announced a new $150 million share repurchase program Thursday which will start on March 27. The buyback plan will run through March 25, 2016.
The announcement of the buyback plan comes shortly after the FCC announced that it awarded Ericsson (ERIC) subsidiary Telcordia a local phone number porting contract. Neustar held a contract to provide the phone porting service for the past 18 years.
Neustar President and CEO Lisa Hook called the FCC's selection process for the contract "procedurally defective," saying the agency's action "presents substantial transition risks and cost to the industry and the consumers it serves." Hook said the company is "considering all options to address the significant flaws in the selection process," and will continue to fulfill its contractual obligations, including a transition to Telcordia.
Neustar also reiterated its guidance for the first half of 2015, saying that it expects revenue of $495 million to $505 million for the first half of the year.
About 2.1 million shares of Neustar were traded by 12:36 p.m. Thursday, about the average trading volume of about 1.1 million shares a day.
TheStreet Ratings team rates NEUSTAR INC as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:
"We rate NEUSTAR INC (NSR) 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 revenue growth, growth in earnings per share and increase in net income. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself and disappointing return on equity."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth came in higher than the industry average of 19.9%. Since the same quarter one year prior, revenues slightly increased by 6.2%. Growth in the company's revenue appears to have helped boost the earnings per share.
- NEUSTAR INC has improved earnings per share by 39.0% 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 two years. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, NEUSTAR INC increased its bottom line by earning $2.77 versus $2.47 in the prior year. This year, the market expects an improvement in earnings ($4.35 versus $2.77).
- Even though the current debt-to-equity ratio is 1.28, it is still below the industry average, suggesting that this level of debt is acceptable within the IT Services industry. Despite the fact that NSR's debt-to-equity ratio is mixed in its results, the company's quick ratio of 2.42 is high and demonstrates strong liquidity.
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. In comparison to other companies in the IT Services industry and the overall market on the basis of return on equity, NEUSTAR INC has underperformed in comparison with the industry average, but has greatly exceeded that of the S&P 500.
- NSR'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 36.29%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last 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: NSR Ratings Report