Back to top

Analyst Blog

On Jun 11, 2013, Zacks Investment Research downgraded SolarWinds Inc. (SWI - Snapshot Report) to a Zacks Rank #5 (Strong Sell).

Why the Downgrade?

The downgrade reflects SolarWinds not-so-impressive first quarter 2013 results as well as the dilutive N-able acquisition, which it completed at the end of May this year.

SolarWinds first quarter earnings of 34 cents per share beat the Zacks Consensus Estimate by a couple of cents. However, revenues of $72.9 million not only failed to beat management’s guided range of $74.9–$75.7 million but also lagged the Zacks Consensus Estimate of $75.0 million.

Post first quarter results, SolarWinds announced the N-able acquisition, for which the company agreed to pay $120.0 million in cash. Although the acquisition is expected to contribute $8.0 to $9.0 million in revenues for the remainder of 2013, it will lower earnings by 11 cents per share.

Currently, SolarWinds expect earnings per share in the range of $1.59 to $1.65 for the full year. Moreover, the acquisition will reduce cash balance (estimated $154.0 million at the end of second quarter compared with $274.0 million at the end of first quarter), which is a major concern in the near term.

Year-to-date, SolarWinds share price has declined approximately 24.93%.

The Zacks Consensus Estimate for the second quarter of 2013 has declined 11.4% (4 cents) to 31 cents over the last 60 days.

The Zacks Consensus Estimate for 2013 decreased 38.0% (11 cents) to $1.31 per share over the last 60 days. The Zacks Consensus Estimate for 2014 dropped 7.1% (12 cents) to $1.58 per share over the same period.

Other Stocks to Consider

Not all network management and related software technology providers are performing as poorly as SolarWinds. We recommend Advent Software (ADVS - Snapshot Report), which has a Zacks Rank #1 (Strong Buy). Netapp Inc. (NTAP - Snapshot Report) and EPIQ System (EPIQ - Snapshot Report), both having a Zacks Rank #2 (Buy), are also looking good at present.

Please login to Zacks.com or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research

Close

Are you a new Zacks Member or a visitor to Zacks.com?

Top Zacks Features

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Zacks.com. Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
RPC INC RES 24.91 +8.35%
LITHIA MOTO… LAD 94.59 +4.60%
DELTA AIR L… DAL 39.15 +3.90%
FLAMEL TECH… FLML 14.51 +3.50%
SOUTHWEST A… LUV 28.87 +2.92%