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Why Key Energy Services (KEG) Is Down Today

Stocks in this article: KEG

NEW YORK (TheStreet) -- Key Energy Services (KEG) was falling -8.1% to $9.23 Thursday after missing analysts' expectations for revenue in the first quarter.

For the first quarter Key Energy reported a loss of -7 cents a share, in-line with the Capital IQ Consensus Estimate. Revenue fell -16.9% to $356.1 million. Analysts expected revenue of $372.83 million for the quarter.

"We are encouraged by the pace of U.S. well completion activity that we've seen since exiting the harsh winter season and by demand for our services in the Permian Basin, now predominantly driven by horizontal-directed activity," chairman, president, and CEO Dick Alario said in a press release. "Further, we are more optimistic about the long-term prospects for well intervention and recompletion activity for the aging horizontal oil shale well inventory. Given the pace of recent customer inquiries and tender activity, we believe customer spending will ramp up as we exit the second quarter and enter the second half of the year."

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TheStreet Ratings team rates KEY ENERGY SERVICES INC as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:

"We rate KEY ENERGY SERVICES INC (KEG) 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 solid stock price performance and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and poor profit margins."

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

  • Compared to its closing price of one year ago, KEG's share price has jumped by 42.93%, exceeding the performance of the broader market during that same time frame. 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.
  • KEG's debt-to-equity ratio of 0.61 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Despite the fact that KEG's debt-to-equity ratio is mixed in its results, the company's quick ratio of 1.72 is high and demonstrates strong liquidity.
  • The revenue fell significantly faster than the industry average of 9.2%. Since the same quarter one year prior, revenues fell by 22.4%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • The gross profit margin for KEY ENERGY SERVICES INC is currently lower than what is desirable, coming in at 28.28%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -3.45% is significantly below that of the industry average.
  • Net operating cash flow has decreased to $71.63 million or 31.30% 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: KEG 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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