RBC Capital Markets Managing Director Mark Sue foresees 6% top line growth for Alcatel-Lucent in calendar year 2009.
 According to Sue: "For CY09, we are assuming just 6% top line growth to our estimate of EUR18.2B. Stronger demand for wireline access infrastructure, growth in optical, and price stabilization in wireless may enable Alcatel-Lucent to potentially expand on this growth rate but we're still maintaining a conservative stance at this point given the company's inconsistent execution." |
Alcatel-Lucent Stock Chart:
Sue adds: "What a mess it's been as Alcatel and Lucent tried to merge, rationalize its product line, while simultaneously fending off competition. At least there are some management changes coming up which should help stabilize the beleaguered company. Alcatel-Lucent announced that Ben Verwaayen, previously of BT will become its new CEO, effective October 1st. On a fundamental basis, the situation still remains challenged for Alcatel, and considering our view that a full recovery is not underway anytime soon, we're maintaining our neutral stance on the shares.
"Verwaayen was CEO of BT from 2002 to 2008 and previously was vice-chairman of Lucent Technologies and brings strong execution skills and broad industry contacts. We look for the change in management to stem the current internal disaccord and articulate a clearer strategy of differentiation. Thus far margin improvements have been difficult to come by for the combined entity.
"Near term for the quarter ending in September, RBC is modeling sales of EUR4.05B versus the street at EUR4.06B and EPS of EUR0.05 versus the street at EUR0.06. We're not looking for any new guidance methodology any time soon and if anything, considering the macro environment and executive changes, Alcatel-Lucent may potentially be more conservative with its full year outlook."
He concludes: "As far as the stock is concerned, the shares are trading at just 0.6x 2009E EV/Sales. Over the last three years, the shares have traded between 0.4x and 2.2x EV/Sales, with an average of 1.2x. On a P/E basis, the shares are trading at 10X our CY09E EPS. Shares are down over 17% for the year. Our rating remains Sector Perform despite the depressed valuation."
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