Calpine (CPN) Stock Rating Downgraded at Deutsche Bank
NEW YORK (TheStreet) -- Calpine (CPN) stock was downgraded to "hold" from "buy" at DeutscheBank on Monday. The firm lowered its price target on the stock to $20 from $25.
The Houston-based wholesale power generator was downgraded after the company issued its 2016 earnings guidance on Friday, Deutsche Bank said.
Calpine projected 2016 adjusted EBITDA of $1.8 billion to $1.95 billion, with a midpoint that is down $100 million from 2015, the firm said.
"While we do not expect any company to react to every market gyration, CPN has had opportunities over the past year to create value through M&A, cost cutting, debt reduction or perhaps even a dividend, and none has been forthcoming," Deutsche Bank added.
Shares of Calpine were down by 1.42% to $15.29 in mid-morning trading on Monday.
Separately, TheStreet Ratings team rates CALPINE CORP as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:
We rate CALPINE CORP (CPN) 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. Among the primary strengths of the company is its respectable return on equity which we feel is likely to continue. At the same time, however, we also find weaknesses including unimpressive growth in net income, generally higher debt management risk and weak operating cash flow.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Independent Power Producers & Energy Traders industry and the overall market, CALPINE CORP's return on equity significantly exceeds that of both the industry average and the S&P 500.
- CPN, with its decline in revenue, underperformed when compared the industry average of 14.9%. Since the same quarter one year prior, revenues fell by 25.6%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- CALPINE CORP has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, CALPINE CORP increased its bottom line by earning $2.35 versus $0.03 in the prior year. For the next year, the market is expecting a contraction of 59.6% in earnings ($0.95 versus $2.35).
- 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 Independent Power Producers & Energy Traders industry. The net income has significantly decreased by 86.3% when compared to the same quarter one year ago, falling from $139.00 million to $19.00 million.
- The debt-to-equity ratio is very high at 3.97 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with this, the company manages to maintain a quick ratio of 0.46, which clearly demonstrates the inability to cover short-term cash needs.
- You can view the full analysis from the report here: CPN