McMoRan Exploration Co. Stock Downgraded (MMR)

NEW YORK ( TheStreet) -- McMoRan Exploration (NYSE: MMR) has been downgraded by TheStreet Ratings from hold to sell. Among the areas we feel are negative, one of the most important has been a generally disappointing historical performance in the stock itself.

Highlights from the ratings report include:
  • MMR's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 49.89%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last 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.
  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, MCMORAN EXPLORATION CO's return on equity significantly trails that of both the industry average and the S&P 500.
  • MCMORAN EXPLORATION CO 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 two years. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, MCMORAN EXPLORATION CO continued to lose money by earning -$0.33 versus -$2.02 in the prior year. For the next year, the market is expecting a contraction of 4.5% in earnings (-$0.35 versus -$0.33).
  • The revenue fell significantly faster than the industry average of 11.8%. Since the same quarter one year prior, revenues fell by 19.2%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • The gross profit margin for MCMORAN EXPLORATION CO is rather high; currently it is at 65.10%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 5.00% trails the industry average.

McMoRan Exploration Co. engages in the exploration, development, and production of oil and natural gas in the shallow waters of the Gulf of Mexico and onshore in the Gulf Coast area of the United States. McMoRan has a market cap of $1.57 billion and is part of the basic materials sector and energy industry. Shares are down 33.1% year to date as of the close of trading on Monday.

You can view the full McMoRan Ratings Report or get investment ideas from our investment research center.

-- Written by a member of TheStreet Ratings Staff

TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model.
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