Rating Change #9
Regency Energy Partners LP
has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its impressive record of earnings per share growth, compelling growth in net income and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, weak operating cash flow and poor profit margins.
Highlights from the ratings report include:
- REGENCY ENERGY PARTNERS LP has improved earnings per share by 42.9% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, REGENCY ENERGY PARTNERS LP turned its bottom line around by earning $0.29 versus -$0.17 in the prior year. This year, the market expects an improvement in earnings ($0.56 versus $0.29).
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Oil, Gas & Consumable Fuels industry. The net income increased by 97.2% when compared to the same quarter one year prior, rising from $14.54 million to $28.68 million.
- RGP, with its decline in revenue, underperformed when compared the industry average of 0.6%. Since the same quarter one year prior, revenues fell by 12.5%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- Net operating cash flow has decreased to $46.13 million or 27.63% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
- In its most recent trading session, RGP has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. Looking ahead, we do not see anything in this company's numbers that would change the one-year trend. It was down over the last twelve months; and it could be down again in the next twelve. Naturally, a bull or bear market could sway the movement of this stock.
Regency Energy Partners LP engages in gathering, treating, processing, compressing, and transporting natural gas and natural gas liquids (NGLs). The company has a P/E ratio of 15.2, below the average energy industry P/E ratio of 58.2 and below the S&P 500 P/E ratio of 17.7. Regency Energy has a market cap of $3.86 billion and is part of the
industry. Shares are down 9% year to date as of the close of trading on Tuesday.
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