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Why Frontline (FRO) Stock Tanked On Tuesday

NEW YORK (TheStreet) -- Shares of Frontline Ltd (FRO) closed lower -16.08% to $2.40 on Tuesday afternoon following the Bermuda-based shipping company's 2014 first quarter earnings results.

Frontline reported a net loss of -$12.1 million, or 13 cents per share, compared to the previous year's net loss of -$18.8 million, or 24 cents per share.

Frontline has a debt over $1 billion and said the downturn may force it to raise equity, sell assets, establish new loans or refinance established arrangements, according to Seeking Alpha.

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TheStreet Ratings team rates FRONTLINE LTD as a Sell with a ratings score of D. TheStreet Ratings Team has this to say about their recommendation:

"We rate FRONTLINE LTD (FRO) a SELL. This is driven by multiple weaknesses, 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 weak operating cash flow and poor profit margins."

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

  • Net operating cash flow has significantly decreased to $6.23 million or 73.71% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • The gross profit margin for FRONTLINE LTD is currently lower than what is desirable, coming in at 26.80%. Regardless of FRO's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, FRO's net profit margin of -9.07% significantly underperformed when compared to the industry average.
  • FRO, with its decline in revenue, slightly underperformed the industry average of 3.0%. Since the same quarter one year prior, revenues slightly dropped by 6.0%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • FRONTLINE LTD has improved earnings per share by 28.6% in the most recent quarter compared to 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, FRONTLINE LTD reported poor results of -$2.38 versus -$0.91 in the prior year. This year, the market expects an improvement in earnings (-$0.69 versus -$2.38).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the Oil, Gas & Consumable Fuels industry average, but is less than that of the S&P 500. The net income increased by 21.3% when compared to the same quarter one year prior, going from -$16.57 million to -$13.03 million.
  • You can view the full analysis from the report here: FRO Ratings Report
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