Apache Corporation Stock Hold Recommendation Reiterated (APA)

Editor's Note: 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.

NEW YORK ( TheStreet) -- Apache Corporation (NYSE: APA) has been reiterated by TheStreet Ratings as a hold with a ratings score of C+ . Among the primary strengths of the company is its expanding profit margins over time. At the same time, however, we also find weaknesses including deteriorating net income, disappointing return on equity and weak operating cash flow.

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Highlights from the ratings report include:
  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 4.4%. Since the same quarter one year prior, revenues slightly dropped by 3.3%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • The gross profit margin for APACHE CORP is rather high; currently it is at 56.90%. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 4.34% trails the industry average.
  • APACHE CORP has exprienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, APACHE CORP increased its bottom line by earning $11.51 versus $8.50 in the prior year. For the next year, the market is expecting a contraction of 16.9% in earnings ($9.57 versus $11.51).
  • Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. In comparison to the other companies in the Oil, Gas & Consumable Fuels industry and the overall market, APACHE CORP's return on equity is significantly below that of the industry average and is below that of the S&P 500.
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Oil, Gas & Consumable Fuels industry. The net income has significantly decreased by 82.0% when compared to the same quarter one year ago, falling from $1,002.00 million to $180.00 million.

Apache Corporation, an independent energy company, explores for, develops, and produces natural gas, crude oil, and natural gas liquids. Apache has a market cap of $32.77 billion and is part of the basic materials sector and energy industry. The company has a P/E ratio of 13.4, below the S&P 500 P/E ratio of 17.7. Shares are up 6.7% year to date as of the close of trading on Friday.

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

--Written by a member of TheStreet Ratings Staff.

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