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Why Hercules Offshore (HERO) Stock Is Down Today

NEW YORK (TheStreet) -- Hercules Offshore (HERO) was falling -3.3% to $4.30 Wednesday after missing analysts' estimates for revenue in the first quarter.

Revenue rose 37.9% from the year-ago quarter to $256.7 million in the first quarter, but missed the Capital IQ Consensus Estimate of $264.64 million. Hercules Offshore reported earnings of 22 cents a share for the quarter, beating the Capital IQ Consensus of 13 cents a share by 9 cents.

"First quarter results reflect a healthy jackup rig market in the U.S. Gulf of Mexico and fleet growth in our International Offshore segment," president and CEO John T. Rynd said in a press release. "Domestic drilling activity remains active, with the possibility of an improvement in demand later this year. Average dayrates in the U.S. Gulf of Mexico continue to rise as various rigs roll into higher paying contracts. Going forward, we expect stable pricing in the U.S. Gulf of Mexico, as all new contracts signed during the latest quarter were executed at current dayrates. Our International Offshore segment benefitted from the contributions of new assets, including the Hercules Triumph and Hercules Resilience."

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TheStreet Ratings team rates HERCULES OFFSHORE INC as a Hold with a ratings score of C-. TheStreet Ratings Team has this to say about their recommendation:

"We rate HERCULES OFFSHORE INC (HERO) 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 robust revenue growth, expanding profit margins and notable return on equity. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, weak operating cash flow and a generally disappointing performance in the stock itself."

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

  • The revenue growth came in higher than the industry average of 8.3%. Since the same quarter one year prior, revenues rose by 34.7%. 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.
  • 46.51% is the gross profit margin for HERCULES OFFSHORE INC 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 -42.98% is in-line with the industry average.
  • HERCULES OFFSHORE INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from 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, HERCULES OFFSHORE INC continued to lose money by earning -$0.17 versus -$0.79 in the prior year. This year, the market expects an improvement in earnings ($0.53 versus -$0.17).
  • 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 2470.6% when compared to the same quarter one year ago, falling from $4.27 million to -$101.15 million.
  • Net operating cash flow has significantly decreased to $3.07 million or 66.48% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • You can view the full analysis from the report here: HERO Ratings Report

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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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