NEW YORK (TheStreet) -- Seadrill (SDRL - Get Report) had its biggest decline in two and a half years on Tuesday after the offshore drilling company postponed plans to increase its dividend. The company also cautioned that rig market growth would likely slow more than expected as oil companies reduce spending.
The market for drilling rigs "may show slower growth" than previously expected in the next two years, the London-based company said in its quarterly report Tuesday. "In the current market, the board sees limited value in increasing the current quarterly distribution" greater than the 98 cents it announced for the fourth quarter, according to Bloomberg. That figure marks an increase from 95 cents in the third quarter.
The stock fell as much as 7.8%, the most since Aug. 8, 2011. The London-based company was dropping 5.65% to $35.55 at 11:31 a.m. EST on Tuesday.
The company's fourth-quarter EBIDTA was $768 million, which was in line with analysts' estimates. Seadrill expects its EBIDTA to remain flat or decline in the first quarter because of operational challenges.
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TheStreet Ratings team rates SEADRILL LTD as a "buy" with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:
"We rate SEADRILL LTD (SDRL) a BUY. This is driven by some important positives, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its robust revenue growth, notable return on equity, compelling growth in net income, good cash flow from operations and impressive record of earnings per share growth. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- SDRL's revenue growth has slightly outpaced the industry average of 8.1%. Since the same quarter one year prior, revenues rose by 17.2%. Growth in the company's revenue appears to have helped boost the earnings per share.
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Energy Equipment & Services industry and the overall market, SEADRILL LTD's return on equity significantly exceeds that of both the industry average and the S&P 500.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Energy Equipment & Services industry. The net income increased by 52.1% when compared to the same quarter one year prior, rising from $188.00 million to $286.00 million.
- Net operating cash flow has increased to $533.00 million or 29.05% when compared to the same quarter last year. In addition, SEADRILL LTD has also modestly surpassed the industry average cash flow growth rate of 22.90%.
- SEADRILL LTD reported significant earnings per share improvement 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 reported lower earnings of $2.32 versus $2.92 in the prior year. This year, the market expects an improvement in earnings ($2.79 versus $2.32).
- You can view the full analysis from the report here: SDRL Ratings Report