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BP Spill Damages Drillers: Ratings Changes

Anadarko Petroleum and Diamond Offshore Drilling had their ratings changed at TheStreet.
Author:

BOSTON (TheStreet) -- BP's (BP) - Get Report oil spill in the Gulf of Mexico has damaged other drillers and companies that do business in the region.

Anadarko Petroleum

(APC) - Get Report

and

Diamond Offshore Drilling

(DO) - Get Report

have been downgraded by

TheStreet's

stock model.

The model downgraded Diamond Offshore Drilling to "hold." Diamond engages in contract drilling in deep water, harsh environment and semisubmersible markets. Its business model could be hurt by legislative responses to the BP disaster.

Quarter

: First-quarter profit decreased 17% to $291 million, or $2.09 a share, as revenue declined 2.9%. The operating margin fell from 52% to 50%. Diamond has $957 million of cash and $1.5 billion of debt, equal to a debt-to-equity ratio of 0.4.

Stock

: Diamond has tumbled 32% during the past year, underperforming U.S. stock indices. It trades at a price-to-projected-earnings ratio of 6.8 and a price-to-cash-flow ratio of 5.2, 64% and 42% discounts to peer averages. It's expensive based on sales.

Consensus

: Of analysts covering Diamond, 10 advise purchasing its shares, 13 recommend holding and 11 suggest selling them.

UBS

(UBS) - Get Report

offers a price target of $105, leaving a potential return of 75%.

Morgan Stanley

(MS) - Get Report

offers a target of $70.

The model downgraded Anadarko Petroleum to "hold." Anadarko is an independent oil and gas company with significant operations in the Gulf of Mexico. During the past three years, Anadarko's revenue has decreased 5% annually, on average.

TheStreet Recommends

Quarter

: Anadarko swung to a first-quarter profit of $716 million, or $1.43, from a loss of $338 million, or 73 cents, a year earlier. Revenue soared 78%. The operating margin turned positive. Anadarko has $3.7 billion of cash and $13 billion of debt.

Stock

: Anadarko has fallen 11% during the past 12 months, lagging behind U.S. benchmarks. It sells for a price-to-projected-earnings ratio of 14, a 23% premium to the industry average. Still, it's cheap based on book value, sales and cash flow.

Consensus

: Of researchers following Anadarko, 19, or 66%, rate its stock "buy" and 10 rate it "hold."

FBR

(FBCM)

forecasts that the stock will double to $90.

JPMorgan

(JPM) - Get Report

predicts that it will advance 85% to $82.

Jefferies

(JEF) - Get Report

says it will hit $80.

-- Reported by Jake Lynch in Boston.

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