NEW YORK (TheStreet) -- Eagle Rock Energy (EROC - Get Report) was falling -17.3% to $4.01 Thursday after announcing the suspension of its distribution before the closing of the sale of its midstream business to Regency Energy Partners (RGP).
The company said the reason for the distribution suspension is to preserve liquidity ahead of the sale due to a potential deal. The FTC recently requested additional information about the midstream sale, causing the delay.
Bank of America-Merrill Lynch cut its price target for Eagle Rock Energy to $5.50 from $6.50, saying the distribution suspension "is a negative and another blow to weary EROC investors that already endured a previous cash distribution cut and unit price underperformace."
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TheStreet Ratings team rates EAGLE ROCK ENERGY PARTNRS LP as a Sell with a ratings score of D+. TheStreet Ratings Team has this to say about their recommendation:
"We rate EAGLE ROCK ENERGY PARTNRS LP (EROC) 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 deteriorating net income, generally high debt management risk, disappointing return on equity, weak operating cash flow and generally disappointing historical performance in the stock itself."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- 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 Oil, Gas & Consumable Fuels industry. The net income has significantly decreased by 206.2% when compared to the same quarter one year ago, falling from -$55.16 million to -$168.93 million.
- The debt-to-equity ratio is very high at 2.18 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. To add to this, EROC has a quick ratio of 0.69, this demonstrates the lack of ability of the company to cover short-term liquidity needs.
- 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, EAGLE ROCK ENERGY PARTNRS LP's return on equity significantly trails that of both the industry average and the S&P 500.
- Net operating cash flow has decreased to $25.18 million or 27.01% when compared to the same quarter last year. In conjunction, when comparing current results to the industry average, EAGLE ROCK ENERGY PARTNRS LP has marginally lower results.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 52.23%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 179.48% compared to the year-earlier 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.
- You can view the full analysis from the report here: EROC Ratings Report