Editor's Note: TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model
NEW YORK (
) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, increase in net income and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, disappointing return on equity and weak operating cash flow.
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Highlights from the ratings report include:
- The revenue growth came in higher than the industry average of 12.9%. Since the same quarter one year prior, revenues rose by 34.8%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- LUFKIN INDUSTRIES INC' earnings per share from the most recent quarter came in slightly below the year earlier quarter. 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, LUFKIN INDUSTRIES INC increased its bottom line by earning $2.14 versus $1.44 in the prior year. This year, the market expects an improvement in earnings ($3.04 versus $2.14).
- The net income growth from the same quarter one year ago has exceeded that of the Energy Equipment & Services industry average, but is less than that of the S&P 500. The net income increased by 4.7% when compared to the same quarter one year prior, going from $18.45 million to $19.31 million.
- Reflecting the weaknesses we have cited, including the decline in the company's earnings per share, LUFK has underperformed the S&P 500 Index, declining 17.03% from its price level of one year ago. Looking ahead, we do not see anything in this company's numbers that would change the one-year trend. It was down over the last twelve months; and it could be down again in the next twelve. Naturally, a bull or bear market could sway the movement of this stock.
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. When compared to other companies in the Energy Equipment & Services industry and the overall market, LUFKIN INDUSTRIES INC's return on equity is below that of both the industry average and the S&P 500.
Lufkin Industries, Inc. manufactures and supplies oilfield and power transmission products for use in energy infrastructure and industrial applications. The company operates through two segments, Oil Field and Power Transmission. The company has a P/E ratio of 24.7, above the average energy industry P/E ratio of 24.4 and above the S&P 500 P/E ratio of 17.7. Lufkin has a market cap of $1.68 billion and is part of the
industry. Shares are down 23% year to date as of the close of trading on Wednesday.
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-- Written by a member of TheStreet Ratings Staff