Why Weatherford (WFT) Is Down Today

NEW YORK (TheStreet) --Weatherford International (WFT) fell 3.8% to $13.29 Thursday after issuing guidance well below consensus and announcing it will cut 7,000 jobs by mid-year.

The oil producer said it expects fourth-quarter earnings of 5 cents to 8 cents a share. Analysts surveyed by Capital IQ expect earnings of 26 cents a share. Weatherford also said ii expects 2014 earnings of between $1.10 and $1.20 a share. Analysts are calling for earnings of $1.22 a share for the year.

The company said it will focus on increasing profit in 2014 by "focusing the organization on growing our core businesses," "making cost base more efficient," and "divesting non-core businesses and reducing our net debt." Weatherford said it will cut 7,000 employees in the first half of the year to reduce costs.

TheStreet Ratings team rates WEATHERFORD INTERNATIONAL as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about its recommendation:

"We rate WEATHERFORD INTERNATIONAL (WFT) a HOLD. The primary factors that have impacted our rating are mixed ? some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations and increase in stock price during the past year. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, generally higher debt management risk and poor profit margins."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Despite its growing revenue, the company underperformed as compared with the industry average of 9.3%. Since the same quarter one year prior, revenues slightly increased by 0.0%. 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.
  • Net operating cash flow has increased to $326.00 million or 41.12% when compared to the same quarter last year. In addition, WEATHERFORD INTERNATIONAL has also vastly surpassed the industry average cash flow growth rate of -71.33%.
  • Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. Despite the fact that it has already risen in the past year, there is currently no conclusive evidence that warrants the purchase or sale of this stock.
  • The debt-to-equity ratio of 1.09 is relatively high when compared with the industry average, suggesting a need for better debt level management. Along with the unfavorable debt-to-equity ratio, WFT maintains a poor quick ratio of 0.70, which illustrates the inability to avoid short-term cash problems.
  • The gross profit margin for WEATHERFORD INTERNATIONAL is currently lower than what is desirable, coming in at 29.74%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 0.57% significantly trails the industry average.