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 largely solid financial position with reasonable debt levels by most measures and notable return on equity. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, deteriorating net income and poor profit margins.
Highlights from the ratings report include:
- OTTER TAIL CORP has exprienced 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. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, OTTER TAIL CORP turned its bottom line around by earning $0.47 versus -$0.21 in the prior year. This year, the market expects an improvement in earnings ($1.10 versus $0.47).
- The debt-to-equity ratio is somewhat low, currently at 0.81, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.80 is somewhat weak and could be cause for future problems.
- OTTR, with its decline in revenue, underperformed when compared the industry average of 8.7%. Since the same quarter one year prior, revenues fell by 14.1%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
- The share price of OTTER TAIL CORP has not done very well: it is down 5.69% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. Looking ahead, other than the push or pull of the broad market, we do not see anything in the company's numbers that may help reverse the decline experienced over the past 12 months. Despite the past decline, the stock is still selling for more than most others in its industry.
- 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 Electric Utilities industry. The net income has significantly decreased by 2246.6% when compared to the same quarter one year ago, falling from $2.06 million to -$44.14 million.
Otter Tail Corporation engages in electric and nonelectric operations in the United States and internationally. It operates in six segments: Electric, Plastics, Manufacturing, Health Services, Food Ingredient Processing, and Other Business Operations. The company has a P/E ratio of 46.8, above the average utilities industry P/E ratio of 25 and above the S&P 500 P/E ratio of 17.7. Otter Tail has a market cap of $792.6 million and is part of the
industry. Shares are down 3.5% year to date as of the close of trading on Thursday.
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-- Written by a member of TheStreet Ratings Staff