Alcatel's (ALU) Recent Financing Deal is 'Huge Positive,' Gives Time for Turnaround - Analyst

December 27, 2012 12:02 PM EST Send to a Friend
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Price: $2.51 -2.33%

Rating Summary:
    12 Buy, 10 Hold, 5 Sell

Rating Trend: Up Up

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    Up: 24 | Down: 28 | New: 14
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Alcatel-Lucent (NYSE: ALU) shares are higher on the session Thursday following positive comments over its recent financing agreement with Goldman Sachs and Credit Suisse.

According to analyst Christian Schwab at Craig-Hallum, the €1.6 billion (about $2.1 billion) facility is a "huge positive" as it give Alcatel time to implement a turnaround plan and "should eliminate near term debt repayment concerns."

Mostly, Schwab believes that Alcatel is "very well aware" of its operating challenges and is taking "aggressive steps" to implement a turnaround plan. Alcatel is looking to improve revs, gross, and operating margins from €14.6 billion, 31 percent, and (0.7) percent over the last 12 months to €15.2 billion, 35 percent to 37 percent, and 6 percent to 9 percent by 2015.

Aside form an internal turnaround, the macro environment is starting to share up as well, Schwab notes. Europe is stabilizing, China is showing signs of recovery, Alcatel's largest customer -- AT&T (NYSE: T) -- is planning on $22 billion on CapEx annually through 2015, and T-Mobile is planning an increase by about $500 million to $700 million in 2013. Alcatel has also "secured LTE roll-outs with Verizon, AT&T, and Sprint and identified roughly €1.0-€1.5 BB in potential proceeds from non-core business divestitures," Schwab noted.

The firm is retaining a Buy rating on Alcatel, raising its price target from $1.50 up to $2.50.

For an analyst ratings summary and ratings history on Alcatel-Lucent click here. For more ratings news on Alcatel-Lucent click here.

Shares of Alcatel-Lucent closed at $1.38 yesterday.


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