Mitel’s leverage is improving, says Cormark

Yesterday, in conjunction with ongoing discussions with potential lenders for refinancing of its existing senior secured credit facilities, Mitel Networks(TSX:MNW) released preliminary Q3 results. The company confirmed that its revenue will be approximately $142-million, and that operating expenses for the quarter are expected to be 42% to 43% of revenue.

Cormark analyst Richard Tse says Mitel is continuing to build leverage in its operating model, and that its margins should begin to improve as a result. He thinks the risk to reward profile is improving for the company. In a research update to clients this morning, Tse upped his fiscal 2013 earnings estimate on Mitel from $0.74 to $0.78 and reiterated his BUY rating and $5 target on Mitel’s stock.

In December, Mitel reported Q2, 2013 results that bested the street’s expectations. The company’s topline of $145.5-million also beat its own guidance of between $140 and $145-million. The street consensus was $142.5-million.

That quarter represented a rebound for the Ottawa-based telco. After returning to Canada with a TSX listing midway through last year, the company’s Q1 was a rare recent misstep, forcing it to cut two-hundred jobs and initiate a short-term restructuring.

Shares of Mitel on the TSX closed today up 4.3% to $3.91.

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