On Jul 22, we downgraded
) to Underperform based on this diversified global telecom
equipment manufacturer's dismal first quarter results.
Why the Downgrade?
Estimates for Alcatel-Lucent, which focuses on the mobile
infrastructure and communications software market, have been
trending down ever since it reported first quarter results on Apr
26. Alcatel-Lucent's first-quarter revenues of $4.26 billion
missed the Zacks Consensus Estimate of $4.27 billion and the
reported loss of 20 cents a share was wider than our estimate
of loss of 11 cents per share.
Following the release of first quarter results, the Zacks
Consensus Estimate for 2013 has widened 3.0% to loss of 34 cents
per share. The Zacks Consensus Estimate for 2014 has also widened
significantly by 8.3% to loss of 13 cents per share. With the
Zacks Consensus Estimates for both 2013 and 2014 going down, the
company now has a Zacks Rank #4 (Sell).
Cause for Concern
The company's first quarter results were not encouraging as
overall revenues dropped due to decline across its segments. In
addition, gross margin was impacted by weakness of the U.S.
dollar and an adverse impact from product and geographic mix.
Further, changing its chief executive officer twice has not
helped the company as it failed to revive its earnings. In
addition, Alcatel-Lucent has a credit rating of B3 from Moody's
Investors Service and B- from Standard and Poor's, both being six
steps below investment grade ratings.
Stocks That Warrant a Look
While we prefer to avoid Alcatel Lucent until we see signs of
improvement in the company's performance, other telecom stocks
worth a look are
Mitel Networks Solutions
Sonus Networks Inc.
). All three carry a Zacks Rank #2 (Buy).
ALCATEL ADS (ALU): Free Stock Analysis Report
MITEL NETWORKS (MITL): Free Stock Analysis
MOTOROLA SOLUTN (MSI): Free Stock Analysis
SONUS NETWORKS (SONS): Free Stock Analysis
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