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TheStreet Open House

Why SandRidge Energy (SD) Is Up Today

Stock quotes in this article: SD

NEW YORK (TheStreet) -- SandRidge Energy (SD) was gaining 1.8% to $6.45 on Friday following better-than-expected quarterly results and despite receiving a subpoena regarding antitrust violations.

For the fourth quarter, SandRidge Energy posted earnings of 3 cents a share, while analysts expected the company to break even for the quarter. The energy company reported revenue of $465.1 million, beating analysts' estimates of $454.4 million.

The company announced that daily production for the quarter was 89.2 million barrels of oil equivalent per day.

In a separate filing, SandRidge disclosed that it received a subpoena from the U.S. Department of Justice on Dec. 18, 2013. The subpoena is connected to an ongoing investigation of possible antitrust law violations in relation to the purchase or lease of land, oil, or natural gas rights. The company said it is complying with the investigation. 

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TheStreet Ratings team rates SANDRIDGE ENERGY INC as a Sell with a ratings score of D+. TheStreet Ratings Team has this to say about its recommendation:

"We rate SANDRIDGE ENERGY INC (SD) a SELL. This is driven by some concerns, 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 disappointing return on equity and generally high debt management risk."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • 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. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, SANDRIDGE ENERGY INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • Currently the debt-to-equity ratio of 1.76 is quite high overall and when compared to the industry average, suggesting that the current management of debt levels should be re-evaluated. Even though the debt-to-equity ratio is weak, SD's quick ratio is somewhat strong at 1.49, demonstrating the ability to handle short-term liquidity needs.
  • SD, with its decline in revenue, slightly underperformed the industry average of 3.3%. Since the same quarter one year prior, revenues slightly dropped by 7.3%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. Turning our attention to the future direction of the stock, we do not believe this stock offers ample reward opportunity to compensate for the risks, despite the fact that it rose over the past year.
  • The gross profit margin for SANDRIDGE ENERGY INC is rather high; currently it is at 69.04%. 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 -14.82% is in-line with the industry average.
  • You can view the full analysis from the report here: SD Ratings Report

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