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Rowan Companies PLC Stock Downgraded (RDC)

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) -- Rowan Companies (NYSE:RDC) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including deteriorating net income and feeble growth in the company's earnings per share.

  • EXCLUSIVE OFFER: Jim Cramer's Protégé, Dave Peltier, only buys Stocks Under $10 that he thinks could potentially double. See what he's trading today with a 14-day FREE pass.

Highlights from the ratings report include:

  • RDC's very impressive revenue growth greatly exceeded the industry average of 12.5%. Since the same quarter one year prior, revenues leaped by 50.8%. 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.
  • The current debt-to-equity ratio, 0.31, is low and is below the industry average, implying that there has been successful management of debt levels. Along with this, the company maintains a quick ratio of 2.93, which clearly demonstrates the ability to cover short-term cash needs.
  • 46.80% is the gross profit margin for ROWAN COMPANIES PLC which we consider to be strong. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 7.80% trails the industry average.
  • ROWAN COMPANIES PLC's earnings per share declined by 16.0% in the most recent quarter compared to the same quarter a year ago. The company has reported a trend of declining earnings per share over the past two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, ROWAN COMPANIES PLC reported lower earnings of $1.08 versus $2.29 in the prior year. This year, the market expects an improvement in earnings ($1.98 versus $1.08).
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Energy Equipment & Services industry. The net income has significantly decreased by 85.8% when compared to the same quarter one year ago, falling from $193.81 million to $27.58 million.
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Rowan Companies plc, through its subsidiaries, provides offshore oil and gas contract drilling services in the United States and internationally. The company has a P/E ratio of 24.2, above the S&P 500 P/E ratio of 17.7. Rowan Companies has a market cap of $4 billion and is part of the basic materials sector and energy industry. Shares are up 8.5% year to date as of the close of trading on Monday.

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

-- Written by a member of TheStreet Ratings Staff

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