Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link
NEW YORK (
-- SM Energy
) 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, expanding profit margins and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income and generally higher debt management risk.
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Highlights from the ratings report include:
- The revenue growth came in higher than the industry average of 3.8%. Since the same quarter one year prior, revenues rose by 21.6%. 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.
- The gross profit margin for SM ENERGY CO is currently very high, coming in at 72.70%. It has increased significantly from the same period last year. Along with this, the net profit margin of 8.88% is above that of the industry average.
- SM ENERGY CO's earnings per share declined by 22.1% 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, SM ENERGY CO turned its bottom line around by earning $2.52 versus -$0.84 in the prior year. This year, the market expects an improvement in earnings ($6.67 versus $2.52).
- The change in net income from the same quarter one year ago has exceeded that of the Oil, Gas & Consumable Fuels industry average, but is less than that of the S&P 500. The net income has decreased by 21.9% when compared to the same quarter one year ago, dropping from $76.52 million to $59.78 million.
- SM's debt-to-equity ratio of 0.92 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Despite the fact that SM's debt-to-equity ratio is mixed in its results, the company's quick ratio of 0.70 is low and demonstrates weak liquidity.
SM Energy Company, an independent energy company, is engaged in the acquisition, exploration, development, and production of crude oil, natural gas, and natural gas liquids in North America. SM Energy has a market cap of $5.17 billion and is part of the basic materials sector and energy industry. Shares are down 3.5% year to date as of the close of trading on Thursday.
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