Rating Change #2

Linn Energy LLC ( LINE) has been upgraded by TheStreet Ratings from hold to buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, compelling growth in net income, notable return on equity, impressive record of earnings per share growth and expanding profit margins. We feel these strengths outweigh the fact that the company has had generally poor debt management on most measures that we evaluated.

Highlights from the ratings report include:
  • LINE's very impressive revenue growth greatly exceeded the industry average of 11.9%. Since the same quarter one year prior, revenues leaped by 380.0%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Oil, Gas & Consumable Fuels industry. The net income increased by 98.6% when compared to the same quarter one year prior, rising from -$446.68 million to -$6.20 million.
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market on the basis of return on equity, LINN ENERGY LLC has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
  • LINN ENERGY LLC 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. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, LINN ENERGY LLC turned its bottom line around by earning $2.21 versus -$0.71 in the prior year. For the next year, the market is expecting a contraction of 25.3% in earnings ($1.65 versus $2.21).
  • The gross profit margin for LINN ENERGY LLC is rather high; currently it is at 69.50%. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, LINE's net profit margin of -1.80% significantly underperformed when compared to the industry average.

Linn Energy, LLC, an independent oil and natural gas company, engages in the acquisition and development of oil and gas properties. The company's properties are primarily located in the Mid-Continent, the Permian Basin, Michigan, California, and the Williston Basin in the United States. The company has a P/E ratio of 7.1, below the average energy industry P/E ratio of 7.6 and below the S&P 500 P/E ratio of 17.7. Linn Energy has a market cap of $7.39 billion and is part of the basic materials sector and energy industry. Shares are down 2.2% year to date as of the close of trading on Friday.

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

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