Alcatel Lucent (ALU) Stock Jumping Today on Possible Asset Sale to Nokia

NEW YORK (TheStreet) -- Shares of Alcatel Lucent SA are higher by 7.92% to $4.36 on heavy volume in late afternoon trading on Monday, following a Bloomberg report suggesting the communications and networking company is in talks with Nokia regarding the sale of Alcatel's wireless assets. Finland-based Nokia is looking to boost it telecommunications-equipment business and an agreement to buy the wireless segment could come as early as this week, sources told Bloomberg. Shares of Nokia are gaining by 2.23% to $8.24 on heavy volume this afternoon, as the stock continues to rise following Bloomberg's Friday report stating the company is exploring the sale of its HERE map business. Nokia is also said to have examined a full takeover of Alcatel, but the most likely outcome remains the purchase of the wireless business. In 2014 the segment had revenue of $5 billion (4.7 billion euros). There has been no agreement reached, and the sources cautioned that negotiations could come to nothing. Separately, TheStreet Ratings team rates ALCATEL-LUCENT as a Hold with a ratings score of C-. TheStreet Ratings Team has this to say about their recommendation: "We rate ALCATEL-LUCENT (ALU) 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 impressive record of earnings per share growth, compelling growth in net income and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including weak operating cash flow, a generally disappointing performance in the stock itself and generally higher debt management risk." Highlights from the analysis by TheStreet Ratings Team goes as follows: ALCATEL-LUCENT reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, ALCATEL-LUCENT continued to lose money by earning -$0.02 versus -$0.74 in the prior year. This year, the market expects an improvement in earnings ($0.23 versus -$0.02). 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 133.0% when compared to the same quarter one year prior, rising from $149.55 million to $348.44 million. 38.74% is the gross profit margin for ALCATEL-LUCENT which we consider to be strong. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, ALU's net profit margin of 8.80% significantly trails the industry average. The debt-to-equity ratio is very high at 2.84 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Even though the debt-to-equity ratio is weak, ALU's quick ratio is somewhat strong at 1.06, demonstrating the ability to handle short-term liquidity needs. Net operating cash flow has decreased to $514.31 million or 23.28% when compared to the same quarter last year. In conjunction, when comparing current results to the industry average, ALCATEL-LUCENT has marginally lower results. You can view the full analysis from the report here: ALU Ratings Report Must Read: Warren Buffett's Top 25 Stocks for 2015

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