TSC Ratings' Updates: Murphy Oil

TSC Ratings provides exclusive stock, ETF and mutual fund ratings and commentary based on award-winning, proprietary tools. Its "safety first" approach to investing aims to reduce risk while seeking solid outperformance on a total return basis.

The following ratings changes were generated on Monday, May 4.

We've upgraded Canadian National Railway (CNI) from hold to buy, driven by its increase in net income, expanding profit margins, good cash flow from operations, largely solid financial position with reasonable debt levels by most measures and growth in earnings per share. Although the company may harbor some minor weaknesses, we feel they are unlikely to have a significant impact on results.

Net income rose 36.3% compared with the year-ago quarter, from $311 million to $424 million. The 39.3% gross profit margin has increased since the year-ago quarter, and net profit margin is 22.8%. Net operating cash flow is up 92.7% to $318 million from the same quarter last year. The 0.77 debt-to-equity ratio is below the industry average, and the quick ratio is 0.7. Revenue dropped 3.5% since the year-ago quarter but outperformed the industry average. Earnings per share increased.

We've upgraded Murphy Oil (MUR) from hold to buy, driven by its largely solid financial position with reasonable debt levels by most measures, notable return on equity and attractive valuation levels. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself.

Murphy's debt-to-equity ratio of 0.16 is below the industry average, and it has a quick ratio or 1.12. Return on equity has increased compared with the year-ago quarter. Revenue fell by 20.1% but outperformed the industry average. EPS decreased. Net income fell 38.2% compared with the year-ago quarter. From $206.12 million to $127.37 million.

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