NEW YORK ( TheStreet) -- Teekay Corporation (NYSE: TK) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its revenue growth and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, generally poor debt management and disappointing return on equity. Highlights from the ratings report include:
- Despite its growing revenue, the company underperformed as compared with the industry average of 11.7%. Since the same quarter one year prior, revenues slightly increased by 2.0%. 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.
- 49.40% is the gross profit margin for TEEKAY CORP which we consider to be strong. It has increased from the same quarter the previous year. Along with this, the net profit margin of 9.40% is above that of the industry average.
- TEEKAY CORP's earnings per share declined by 40.5% in the most recent quarter compared to the same quarter a year ago. The company has reported a trend of declining earnings per share over the past year. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, TEEKAY CORP reported poor results of -$5.28 versus -$3.68 in the prior year. This year, the market expects an improvement in earnings (-$0.64 versus -$5.28).
- The debt-to-equity ratio is very high at 4.26 and currently higher than the industry average, implying that there is very poor management of debt levels within the company. Along with the unfavorable debt-to-equity ratio, TK maintains a poor quick ratio of 0.95, which illustrates the inability to avoid short-term cash problems.
- 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 Oil, Gas & Consumable Fuels industry and the overall market, TEEKAY CORP's return on equity significantly trails that of both the industry average and the S&P 500.
-- Written by a member of TheStreet Ratings Staff