NEW YORK ( TheStreet) -- Regency Energy Partners (NYSE: RGP) 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, impressive record of earnings per share growth and compelling growth in net income. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, weak operating cash flow and poor profit margins. Highlights from the ratings report include:
- RGP's revenue growth has slightly outpaced the industry average of 11.8%. Since the same quarter one year prior, revenues rose by 12.8%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- REGENCY ENERGY PARTNERS LP reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, REGENCY ENERGY PARTNERS LP turned its bottom line around by earning $0.29 versus -$0.17 in the prior year. This year, the market expects an improvement in earnings ($0.43 versus $0.29).
- Despite currently having a low debt-to-equity ratio of 0.42, it is higher than that of the industry average, inferring that management of debt levels may need to be evaluated further. Regardless of the somewhat mixed results with the debt-to-equity ratio, the company's quick ratio of 1.02 is sturdy.
- Net operating cash flow has declined marginally to $56.07 million or 2.26% 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.
- RGP has underperformed the S&P 500 Index, declining 15.70% from its price level of one year ago. 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.
-- Written by a member of TheStreet Ratings Staff