NEW YORK (TheStreet) -- Shares of Pioneer Energy Services Corp. (PES) are unchanged in pre-market trading as Deutsche Bank downgraded the company to "hold" from "buy" and lowered its price target to $5 from $10. The stock closed up 4.52% at $5.32 yesterday.

"PES' management has aggressively responded to the downturn by accelerating the high grading of its drilling fleet by essentially exiting the vertical drilling market. With five new-builds coming into its fleet in 2015 and with its lowest margin rigs being sold off, it should help to partially offset the challenging market conditions," analysts said.

But at a recent conference, management lowered guidance due to greater than expected pricing pressures, reduction in activity levels, and some bad weather impact in its Production Services business, analysts noted.

Therefore Deutsche Bank is lowering their first quarter estimate to a loss of 23 cents from a loss of 11 cents. They are also lowering their 2015 and 2016 estimates to a loss of $1.09 and a loss of 90 cents from 10 cents and 10 cents, respectively.

Accordingly, they are downgrading, as they believe the earnings recovery across the land drilling space will lag and its Production Services business may not be enough to offset the deterioration from land drilling.

San Antonio, TX-based Pioneer Energy Services, formerly Pioneer Drilling Co., provides drilling and production services to independent oil and gas exploration and production companies throughout much of the onshore oil and gas producing regions of the U.S. and internationally in Colombia.

Separately, TheStreet Ratings team rates PIONEER ENERGY SERVICES CORP as a Sell with a ratings score of D. TheStreet Ratings Team has this to say about their recommendation:

"We rate PIONEER ENERGY SERVICES CORP (PES) a SELL. This is driven by several weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, disappointing return on equity, poor profit margins, generally disappointing historical performance in the stock itself and feeble growth in its earnings per share."

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

  • 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 Energy Equipment & Services industry. The net income has significantly decreased by 1791.6% when compared to the same quarter one year ago, falling from -$2.52 million to -$47.57 million.
  • 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. Compared to other companies in the Energy Equipment & Services industry and the overall market, PIONEER ENERGY SERVICES CORP's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for PIONEER ENERGY SERVICES CORP is currently lower than what is desirable, coming in at 34.12%. Regardless of PES's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, PES's net profit margin of -16.80% significantly underperformed when compared to the industry average.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 62.61%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 1775.00% compared to the year-earlier quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
  • PIONEER ENERGY SERVICES CORP has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has reported a trend of declining earnings per share over the past two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, PIONEER ENERGY SERVICES CORP reported poor results of -$0.61 versus -$0.58 in the prior year. This year, the market expects an improvement in earnings (-$0.59 versus -$0.61).
  • You can view the full analysis from the report here: PES Ratings Report

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