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Why Alcatel-Lucent Shares Popped

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of networking gear maker Alcatel-Lucent (UNKNOWN: ALU.DL  ) surged 13% today after its quarterly results and outlook topped Wall Street expectations.

So what: Alcatel has been trying to reorganize over the past several months, and today's Q3 results -- narrower-than-expected loss of 200 million euros on a 7% revenue increase -- suggest that management's turnaround plan is rapidly gaining traction. In fact, gross margins during the quarter increased 480 basis points to 32.6%, giving analysts plenty of good vibes over its competitive position and cost-cutting initiatives going forward.

Now what: Looking ahead, management sees strong seasonal activity in Q4 and expects to save up to 300 million euros in fixed costs for the full year. "We are seeing the first positive signs of our new operating model in our day-to-day business and are encouraged by the substantial progress in the Shift Plan key metrics," CEO Michel Combes said. "Going forward, we remain fully focused on execution to leverage the momentum we are building." With the stock now up about 280% over its 52-week lows, however, I'd wait for some of the exuberance to fade before buying into that bullishness.

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Related Tickers

12/31/1969 7:00 PM
ALU.DL $0.00 Down +0.00 +0.00%
Alcatel-Lucent CAPS Rating: ****