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Brocade Surges as First-Quarter Results Top Estimates

BRCD received two early-morning price-target hikes

by 2/22/2012 11:00:16 AM
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Brocade Communications Systems, Inc. (BRCD - 5.75) stepped up to the earnings plate after last night's bell. For the fiscal first quarter, BRCD banked a profit of $58.6 million, or 12 cents per share, more than double last year's profit of $26.9 million, or 5 cents per share. Excluding items, earnings rose to 20 cents per share. Revenue improved 2.7% to a record $560.6 million, while gross margin expanded to 61.5%. The results easily bested analysts' expectations for adjusted earnings of 13 cents per share on $524.4 million in sales.

Looking ahead, BRCD is calling for second-quarter adjusted earnings of 11 cents to 12 cents per share, on revenue ranging between $530 million and $545 million. Wall Street, meanwhile, is forecasting a per-share profit of 13 cents on $537 million in sales.

On a technical basis, the stock has added a respectable 6% in 2012. What's more, BRCD has been ushered higher by its 10-week moving average since October. The security dropped last Friday on reports that Blackstone Group (BX) withdrew its bid to acquire the network equipment maker, but BRCD managed to find a foothold atop this steady layer of support.

Price Chart of BRCD With 10-Week Moving Average

Things are not so rosy on the sentiment front, however, where attention from the brokerage bunch has been rather bearish. Zacks reports that 19 out of 24 analysts maintain a "hold" or worse suggestion toward the stock. In addition, the average 12-month price target of $5.97 -- as calculated by Thomson Reuters -- represents a slim 8% premium to yesterday's close of $5.50.

With traders cheering BRCD's results early in today's session, the stock could be the benefactor of some contrarian-related tailwinds in the short term. Any analyst upgrades and/or price-target hikes could encourage the security's positive price direction. As it turns out, RBC Capital and ThinkEquity both raised their respective price targets on BRCD to $6.50 this morning -- a neighborhood the equity has not visited on a daily closing basis since last July.

At last check, BRCD has tacked on around 5% to trade at $5.75.

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