NEW YORK (TheStreet) -- Legacy Reserves (LGCY - Get Report) stock has been upgraded to "buy" from "neutral," UBS said Monday. The firm said the move was driven by the company's alliance with WPX Energy. A $31 price target was given.
Separately, TheStreet Ratings team rates LEGACY RESERVES LP as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:
"We rate LEGACY RESERVES LP (LGCY) 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, increase in net income and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including generally higher debt management risk and disappointing return on equity."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth came in higher than the industry average of 3.3%. Since the same quarter one year prior, revenues rose by 14.8%. Growth in the company's revenue appears to have helped boost the earnings per share.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Oil, Gas & Consumable Fuels industry. The net income increased by 107.8% when compared to the same quarter one year prior, rising from -$6.71 million to $0.53 million.
- Net operating cash flow has slightly increased to $60.17 million or 8.44% when compared to the same quarter last year. Despite an increase in cash flow, LEGACY RESERVES LP's cash flow growth rate is still lower than the industry average growth rate of 18.91%.
- Currently the debt-to-equity ratio of 1.87 is quite high overall and when compared to the industry average, suggesting that the current management of debt levels should be re-evaluated. To add to this, LGCY has a quick ratio of 0.66, 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, LEGACY RESERVES LP'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: LGCY Ratings Report