Brightpoint Stock Up on Deal Flow

Brightpoint Inc. (), a global leader in distribution and customized logistic services for wireless equipment manufacturers and carriers, announced that its subsidiary Brightpoint North America L.P. has entered into a logistic services relationship with mobile firm FreedomPop. As a result of the deal, Brightpoint shares closed more than 6% higher on Thursday.

According to the deal, Brightpoint North America will provide a variety of critical logistic services like inventory management, Kitting, packaging, transportation management, order fulfillment and reverse logistics. This agreement will help FreedomPop to provide timely delivery of its devices as the company plans to offer 1 gigabyte of free wireless data connection to its customers through a wholesale agreement with Clearwire Corp. (CLWR - Snapshot Report).

We have recently upgraded our recommendation on Brightpoint from Underperform to Neutral, as the company has slowly started to gain new orders, which may partially offset the loss of a major client of its domestic Logistic segment. It is believed that the recent order flows have brought momentum for the company’s share price after it plummeted over 55% last year.

Brightpoint announced that one of its major customers in the U.S. started the process of terminating its existing contract with the company since April 2012. Additionally, in the first quarter of 2012, gross margin, operating margin, and net margin dipped 1.5%, 0.5%, and 0.6% year over year, respectively. This has forced the company to revise its financial forecast for fiscal 2012 downwards twice in the last 3 months.

However, in June 2012, Brightpoint won two vital contracts as well as renewed another important deal. The company has signed a logistic assistance agreement with MetroPCS Communications Inc. () and renewed its existing logistic assistance agreement with Sprint-Nextel Corp (S - Analyst Report) to provide service to the latter’s several prepaid wireless businesses.

Furthermore, Brightpoint also received a distribution and services contract from Duracell Powermat LLC. We expect these new deals in the high margin Logistic segment to add to the company’s margin going forward.

Recommendation:

We are maintaining our long-term Neutral recommendation on Brightpoint Inc. Currently Brightpoint Inc. has a Zacks #3 Rank, implying a short-term hold rating on the stock.