On Jun 11, 2013, Zacks Investment Research downgraded
SolarWinds Inc. (
to a Zacks Rank #5 (Strong Sell).
Why the Downgrade?
The downgrade reflects SolarWinds not-so-impressive first quarter
2013 results as well as the dilutive N-able acquisition, which it
completed at the end of May this year.
SolarWinds first quarter earnings of 34 cents per share beat the
Zacks Consensus Estimate by a couple of cents. However, revenues
of $72.9 million not only failed to beat management's guided
range of $74.9-$75.7 million but also lagged the Zacks Consensus
Estimate of $75.0 million.
Post first quarter results, SolarWinds announced the N-able
acquisition, for which the company agreed to pay $120.0 million
in cash. Although the acquisition is expected to contribute $8.0
to $9.0 million in revenues for the remainder of 2013, it will
lower earnings by 11 cents per share.
Currently, SolarWinds expect earnings per share in the range of
$1.59 to $1.65 for the full year. Moreover, the acquisition will
reduce cash balance (estimated $154.0 million at the end of
second quarter compared with $274.0 million at the end of first
quarter), which is a major concern in the near term.
Year-to-date, SolarWinds share price has declined approximately
The Zacks Consensus Estimate for the second quarter of 2013 has
declined 11.4% (4 cents) to 31 cents over the last 60 days.
The Zacks Consensus Estimate for 2013 decreased 38.0% (11 cents)
to $1.31 per share over the last 60 days. The Zacks Consensus
Estimate for 2014 dropped 7.1% (12 cents) to $1.58 per share over
the same period.
Other Stocks to Consider
Not all network management and related software technology
providers are performing as poorly as SolarWinds. We recommend
Advent Software (
, which has a Zacks Rank #1 (Strong Buy).
Netapp Inc. (
EPIQ System (
, both having a Zacks Rank #2 (Buy), are also looking good at
ADVENT SOFTWARE (ADVS): Free Stock Analysis
EPIQ SYS INC (EPIQ): Free Stock Analysis
NETAPP INC (NTAP): Free Stock Analysis Report
SOLARWINDS INC (SWI): Free Stock Analysis
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