NEW YORK (TheStreet) -- Forest Oil Corporation (FST) was plummeting 38.08% to $2.00 Wednesday after the company reported fourth-quarter earnings that came up short of analysts' expectations and announced a significant decline in its end-of-year reserves estimate.
The company reported earnings per share of 2 cents for the quarter, which just missed the consensus estimate of 3 cents from analysts polled by Thomson Reuters. The company also missed on revenue at $88.49 million, which came up well short of analysts' expectations of $96.31 million.
Furthermore, Forest Oil reported that its estimates as of Dec. 31, 2013 proved reserves of 625 billions of cubic feet equivalent (Bcfe), which were 66% proved developed, compared to 1,363 Bcfe at December 31, 2012, which were 69% proved developed. The decrease was attributed to 800 Bcfe of asset divestitures in 2013 partially offset by extensions and discoveries of 148 Bcfe.
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TheStreet Ratings team rates FOREST OIL CORP as a "sell" with a ratings score of D. TheStreet Ratings Team has this to say about their recommendation:
"We rate FOREST OIL CORP (FST) a SELL. This is driven by several weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its generally disappointing historical performance in the stock itself and weak operating cash flow."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- FST's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 48.51%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
- Net operating cash flow has decreased to $73.57 million or 32.74% when compared to the same quarter last year. Despite a decrease in cash flow FOREST OIL CORP is still fairing well by exceeding its industry average cash flow growth rate of -51.05%.
- FST, with its decline in revenue, underperformed when compared the industry average of 3.3%. Since the same quarter one year prior, revenues fell by 24.3%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- FOREST OIL CORP 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, FOREST OIL CORP swung to a loss, reporting -$11.18 versus $0.86 in the prior year. This year, the market expects an improvement in earnings ($0.17 versus -$11.18).
- The gross profit margin for FOREST OIL CORP is currently very high, coming in at 77.38%. It has increased significantly from the same period last year. Regardless of the strong results of the gross profit margin, the net profit margin of 1.87% trails the industry average.
- You can view the full analysis from the report here: FST Ratings Report