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TheStreet Open House

Why BP (BP) Stock Is Down Today

NEW YORK (TheStreet) -- BP  (BP) dipped Thursday after the U.S. placed strict sanctions on Russia and Rosneft, the nation's largest oil producer, in which BP has a 19.75% stake.

The U.S. aimed the sanctions at a few large Russian firms that keep high U.S. dollar debt levels, and Rosneft falls into the category. The sanctions prevent these companies from borrowing money in U.S. dollars for more than 90 days, which forces them to borrow in other currencies for new medium-term or long-term funding.

But these sanctions do not restrict oil sales or joint ventures with U.S. companies, so they should not affect Rosneft's oil sales. BP said it was studying the sanctions, and it initially believes they appear to restrict access to U.S. medium and long-term debt and equity capital markets, according to Reuters.

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The stock was down 2.16% to $51.15 at 12:55 p.m.

Separately, TheStreet Ratings team rates BP PLC as a "buy" with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:

"We rate BP PLC (BP) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its attractive valuation levels, good cash flow from operations, solid stock price performance and largely solid financial position with reasonable debt levels by most measures. We feel these strengths outweigh the fact that the company has had sub par growth in net income."

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

  • Net operating cash flow has significantly increased by 107.48% to $8,231.00 million when compared to the same quarter last year. In addition, BP PLC has also vastly surpassed the industry average cash flow growth rate of 17.51%.
  • Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • The current debt-to-equity ratio, 0.41, is low and is below the industry average, implying that there has been successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.93 is somewhat weak and could be cause for future problems.
  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 3.2%. Since the same quarter one year prior, revenues slightly dropped by 2.5%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • You can view the full analysis from the report here: BP Ratings Report

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

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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