NEW YORK (TheStreet) -- CommScope (COMM) shares are down 5.88% to $30.51 in morning trading on Thursday after the company announced the secondary offering of 20 million of its shares by The Carlyle Group with JPMorgan (JPM) acting as the sole underwriter for the offering.
JPMorgan will have the option to purchase up to 3 million additional shares from Carlyle as part of the sale.
The broadband infrastructure provider will not receive any proceeds from the offering of the shares by Carlyle and the sale is expected to end June 16.
Carlyle will continue to own over 61 million shares, approximately 32% of the company's outstanding common stock, following the closing of the offering. Carlyle will now only be allowed to designate six directors to CommScope's board as opposed to the nine members it was previously allotted.
TheStreet Ratings team rates COMMSCOPE HOLDING CO INC as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:
"We rate COMMSCOPE HOLDING CO INC (COMM) 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 notable return on equity, good cash flow from operations and solid stock price performance. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income and generally higher debt management risk."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Communications Equipment industry and the overall market, COMMSCOPE HOLDING CO INC's return on equity exceeds that of both the industry average and the S&P 500.
- Net operating cash flow has significantly increased by 103.49% to $1.24 million when compared to the same quarter last year. In addition, COMMSCOPE HOLDING CO INC has also vastly surpassed the industry average cash flow growth rate of -73.47%.
- Compared to its closing price of one year ago, COMM's share price has jumped by 28.45%, exceeding the performance of the broader market during that same time frame. Setting our sights on the months ahead, however, we feel that the stock's sharp appreciation over the last year has driven it to a price level which is now relatively expensive compared to the rest of its industry. The implication is that its reduced upside potential is not good enough to warrant further investment at this time.
- The debt-to-equity ratio is very high at 2.02 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Despite the company's weak debt-to-equity ratio, the company has managed to keep a very strong quick ratio of 2.97, which shows the ability to cover short-term cash needs.
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed against the S&P 500 and did not exceed that of the Communications Equipment industry. The net income has significantly decreased by 38.8% when compared to the same quarter one year ago, falling from $64.49 million to $39.48 million.
- You can view the full analysis from the report here: COMM Ratings Report