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Seadrill Ltd Stock Downgraded (SDRL)

Editor's Note: TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model.

NEW YORK ( TheStreet) -- Seadrill (NYSE: SDRL) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, generally higher debt management risk and disappointing return on equity.

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Highlights from the ratings report include:

  • Despite its growing revenue, the company underperformed as compared with the industry average of 13.3%. Since the same quarter one year prior, revenues rose by 12.8%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • Net operating cash flow has significantly increased by 90.51% to $482.00 million when compared to the same quarter last year. In addition, SEADRILL LTD has also vastly surpassed the industry average cash flow growth rate of -51.08%.
  • SEADRILL LTD's earnings per share declined by 15.5% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, SEADRILL LTD increased its bottom line by earning $2.92 versus $2.56 in the prior year. This year, the market expects an improvement in earnings ($3.04 versus $2.92).
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. When compared to other companies in the Energy Equipment & Services industry and the overall market, SEADRILL LTD's return on equity is below that of both the industry average and the S&P 500.
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Seadrill Limited provides offshore drilling services to the oil and gas industry worldwide. Its services include drilling, completion, and maintenance of offshore wells; production drilling and well maintenance; and well services. The company has a P/E ratio of 13.6, below the average energy industry P/E ratio of 22.6 and below the S&P 500 P/E ratio of 17.7. Seadrill has a market cap of $18.8 billion and is part of the basic materials sector and energy industry. Shares are up 17.6% year to date as of the close of trading on Thursday.

You can view the full Seadrill Ratings Report or get investment ideas from our investment research center.

-- Written by a member of TheStreet Ratings Staff

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