NEW YORK (TheStreet) -- Shares of Emulex Corp. are gaining by 25.47% to $7.98 on very heavy volume in early afternoon trading on Thursday, after it was announced that the network connectivity, monitoring, and management products provider is being acquired by Avago Technologies Inc. . The transaction is valued at $606 million, or $609 million net of cash and debt acquired. The deal is expected to close during the second half of Avago's fiscal year. Following the closing Avago said it is expecting the transaction to be immediately accretive to the company's non-GAAP earnings per share. Exclusive Report: Jim Cramer's Best Stocks for 2015 "This combination represents a great opportunity for Emulex and its employees to build upon our history of delivering leading-edge solutions to our customers, while providing immediate value to our stockholders. Our leading portfolio is a strong complement to Avago's offerings and capabilities, accelerating our strategy to support next generation server and storage architectures," Jeffrey Benck, Emulex CEO said in a statement released by Avago. Avago Technologies stock is advancing by 13.39% to $127.76 this afternoon following the acquisition announcement and Avago's fiscal 2015 first quarter earnings results, which topped analysts' expectations for the period. Separately, TheStreet Ratings team rates EMULEX CORP as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation: "We rate EMULEX CORP (ELX) 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 increase in net income, expanding profit margins and growth in earnings per share. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity, weak operating cash flow and a generally disappointing performance in the stock itself." Highlights from the analysis by TheStreet Ratings Team goes as follows: The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Communications Equipment industry. The net income increased by 207.3% when compared to the same quarter one year prior, rising from -$4.03 million to $4.32 million. The gross profit margin for EMULEX CORP is currently very high, coming in at 70.32%. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, ELX's net profit margin of 3.89% significantly trails the industry average. Despite currently having a low debt-to-equity ratio of 0.32, it is higher than that of the industry average, inferring that management of debt levels may need to be evaluated further. Even though the debt-to-equity ratio shows mixed results, the company's quick ratio of 4.02 is very high and demonstrates very 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. Compared to other companies in the Communications Equipment industry and the overall market, EMULEX CORP's return on equity significantly trails that of both the industry average and the S&P 500. Net operating cash flow has decreased to $16.05 million or 43.82% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower. You can view the full analysis from the report here: ELX Ratings Report
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