We are upgrading our recommendation on
) to Neutral as the company has slowly started gaining new orders,
which may partially offset the loss of a major client of the
company's high-margin Logistics segment in the U.S. Moreover, the
stock is currently trading at attractive valuation multiple as it
plummeted over 56.5% last year.
Nevertheless, broader worldwide macro-economic volatility
remains a major near-term concern. In first-quarter 2012, gross
margin, operating margin, and net margin dropped 1.5%, 0.5%, and
0.6% year over year, respectively. Management was forced to revise
its financial outlook downward twice for fiscal 2012 in the last
three months due to a major client loss and macro-economic
fluctuations. The market has become intensely competitive. Recent
consolidation trend among wireless operators may also become a
long-term negative for the company.
Brightpoint announced that one of its major customers in the
U.S. started the process of terminating its existing contract with
the company since April 2012. This U.S. based customer is expected
to complete its transition to a new vendor by the end of 2012.
Brightpoint managed 6.8 million wireless devices for this
particular client in 2011, which accounts for 8% of the company's
total managed devices through the Logistics segment.
Meanwhile, in June 2012, Brightpoint has won two vital contracts
as well as renewed another important deal. The company has entered
into a logistic assistance agreement with
MetroPCS Communications Inc.
) and renewed its existing logistic assistance agreement with
Sprint Nextel Corp.
) to provide service to the latter's several prepaid wireless
businesses. Furthermore, Brightpoint also received a distribution
and services contract from Duracell Powermat LLC.
BRIGHTPOINT INC (CELL): Free Stock Analysis
METROPCS COMMUN (PCS): Free Stock Analysis
SPRINT NEXTEL (S): Free Stock Analysis Report
To read this article on Zacks.com click here.