NEW YORK (TheStreet) -- Shares of Nabors Industries (NBR) - Get Nabors Industries Ltd. Report are down by 5.78% to $14.81 in early afternoon trading on Tuesday, as some energy and related stocks decline due to the retreat in the price of oil.
A strong dollar and the possibility of that U.S. shale producers will increase drilling activity are driving the commodity's price lower, Reuters reports.
Nabors Industries is a Hamilton, Bermuda-based oil, natural gas, and geothermal on land drilling contractor.
"The main factor weighing on prices is the significantly appreciating U.S. dollar," said Carsten Fritsch, analyst at Commerzbank told Reuters. "What is more, the decline in drilling activity in the U.S. that has been ongoing for 23 weeks appears to have stopped."
Crude oil (WTI) is lower by 2.66% to $58.13 per barrel and Brent crude is slipping by 2.88% to $63.63 per barrel according to the CNBC.com index.
The dollar is gaining by 0.89% on The Wall Street Journal dollar index.
An increase in drilling in the U.S would reduce the possibility of a tighter oil market in the coming months, Reuters noted, adding that this was one factor that had helped Brent rise from an almost six-year low close to $45 in January.
Separately, TheStreet Ratings team rates NABORS INDUSTRIES LTD as a Hold with a ratings score of C-. TheStreet Ratings Team has this to say about their recommendation:
"We rate NABORS INDUSTRIES LTD (NBR) 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 increase in net income, expanding profit margins and growth in earnings per share. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity, weak operating cash flow and a generally disappointing performance in the stock itself."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Energy Equipment & Services industry. The net income increased by 144.0% when compared to the same quarter one year prior, rising from $50.67 million to $123.63 million.
- 35.00% is the gross profit margin for NABORS INDUSTRIES LTD which we consider to be strong. It has increased from the same quarter the previous year. Along with this, the net profit margin of 8.73% is above that of the industry average.
- NABORS INDUSTRIES LTD reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. 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, NABORS INDUSTRIES LTD swung to a loss, reporting -$2.35 versus $0.51 in the prior year. This year, the market expects an improvement in earnings (-$0.16 versus -$2.35).
- Net operating cash flow has decreased to $307.17 million or 30.90% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
- 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, NABORS INDUSTRIES LTD's return on equity significantly trails that of both the industry average and the S&P 500.
- You can view the full analysis from the report here: NBR Ratings Report