Apache Corporation Stock Downgraded (APA)

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

NEW YORK ( TheStreet) -- Apache Corporation (NYSE: APA) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, reasonable valuation levels and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, weak operating cash flow and a generally disappointing performance in the stock itself.

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Highlights from the ratings report include:
  • APA's debt-to-equity ratio is very low at 0.29 and is currently below that of the industry average, implying that there has been very successful management of debt levels.
  • APACHE CORP has experienced 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. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, APACHE CORP increased its bottom line by earning $5.48 versus $4.91 in the prior year. This year, the market expects an improvement in earnings ($7.05 versus $5.48).
  • 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 74.0% when compared to the same quarter one year ago, falling from $668.00 million to $174.00 million.
  • Net operating cash flow has significantly decreased to -$5,276.00 million or 353.41% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.

06/11/2010 APA revenues are 74% from Oil, 19% from North American Gas, and 7% from International Gas. About 20% of their assets are U.S. Gulf Coast, and about half of that is deepwater. Apache has a market cap of $33.29 billion and is part of the basic materials sector and energy industry. Shares are down 3% year to date as of the close of trading on Tuesday.

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

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