One Reason Seadrill (SDRL) Stock is Gaining Today

Seadrill (SDRL) stock is moving higher as oil prices gain.
By Amanda Schiavo ,

NEW YORK (TheStreet) -- Shares of Seadrill (SDRL) - Get Report are gaining by 6.67% to $6.40 in mid-morning trading on Wednesday, as some energy and related stocks get a boost from the rise in oil prices today.

Seadrill is a Hamilton, Bermuda-based offshore drilling contractor providing services to the oil and gas industry.

Oil prices are reversing yesterday's losses on reports of declining stockpiles and increasing refinery activity in the U.S., Reuters reports. However, analysts have noted that the continuing supply glut will keep pressuring prices.

Crude oil (WTI) is up by 1.06% to $41.10 per barrel this morning and Brent crude is higher by 1.42% to $44.19 per barrel, according to the index provided by CNBC.com.

On Tuesday, the American Petroleum Institute said U.S. crude stockpiles fell last week by 482,000 barrels, in part due to higher refinery runs, Reuters added.

The Energy Information Administration will release its official data at 10:30 ET this morning.

Separately, TheStreet Ratings team rates SEADRILL LTD as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:

We rate SEADRILL LTD (SDRL) 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 attractive valuation levels, expanding profit margins and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including generally higher debt management risk, disappointing return on equity and a generally disappointing performance in the stock itself.

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

  • The gross profit margin for SEADRILL LTD is rather high; currently it is at 61.55%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 33.04% significantly outperformed against the industry average.
  • Despite the weak revenue results, SDRL has outperformed against the industry average of 30.8%. Since the same quarter one year prior, revenues slightly dropped by 6.1%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • 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 Energy Equipment & Services industry and the overall market on the basis of return on equity, SEADRILL LTD has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
  • The debt-to-equity ratio of 1.10 is relatively high when compared with the industry average, suggesting a need for better debt level management. Along with the unfavorable debt-to-equity ratio, SDRL maintains a poor quick ratio of 0.81, which illustrates the inability to avoid short-term cash problems.
  • You can view the full analysis from the report here: SDRL

Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of Jim Cramer, TheStreet or any of its contributors.

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