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Why Callon Petroleum (CPE) Hit A One-Year High Today

NEW YORK (TheStreet) -- Callon Petroleum  (CPE - Get Report) hit a one-year high of $8.59 on Thursday after the company released its fourth-quarter results.

The company reported flat adjusted earnings per share, which beat Sterne Agee's estimate of a loss of 3 cents and matched the consensus estimate. Adjusted EBITDA of $17.6 million surpassed Sterne Agee's estimate of $12.6 million and consensus estimate of $15.1 million. Stronger oil production and pricing than expected, lower unit expenses and lower taxes drove the variance, according to Sterne Agee's research note. The firm holds a target price of $7.50 on the company.

Howard Weil also upgraded Callon Petroleum to "outperform" from "sector perform" after the earnings report.

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TheStreet Ratings team rates CALLON PETROLEUM CO/DE as a "hold" with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:

"We rate CALLON PETROLEUM CO/DE (CPE) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its revenue growth, solid stock price performance and increase in net income. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity, generally higher debt management risk and feeble growth in the company's earnings per share."

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

  • The revenue growth came in higher than the industry average of 7.7%. Since the same quarter one year prior, revenues rose by 12.4%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • Powered by its strong earnings growth of 33.33% and other important driving factors, this stock has surged by 29.11% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, our hold rating indicates that we do not recommend additional investment in this stock despite its gains in the past year.
  • The gross profit margin for CALLON PETROLEUM CO/DE is currently very high, coming in at 79.67%. 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 3.51% trails the industry average.
  • Despite currently having a low debt-to-equity ratio of 0.45, it is higher than that of the industry average, inferring that management of debt levels may need to be evaluated further. Even though the debt-to-equity ratio shows mixed results, the company's quick ratio of 0.37 is very low and demonstrates very weak liquidity.
  • 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, CALLON PETROLEUM CO/DE's return on equity significantly trails that of both the industry average and the S&P 500.
  • You can view the full analysis from the report here: CPE Ratings Report

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

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