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) -- El Paso Pipeline Partners (NYSE: EPB) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its revenue growth, notable return on equity and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including feeble growth in the company's earnings per share, generally higher debt management risk and weak operating cash flow.
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- EPB's revenue growth has slightly outpaced the industry average of 3.3%. Since the same quarter one year prior, revenues slightly increased by 0.3%. 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.
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. When compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, EL PASO PIPELINE PARTNERS LP's return on equity exceeds that of the industry average and significantly exceeds that of the S&P 500.
- The gross profit margin for EL PASO PIPELINE PARTNERS LP is currently very high, coming in at 72.12%. Regardless of EPB's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, EPB's net profit margin of 40.66% significantly outperformed against the industry.
- EL PASO PIPELINE PARTNERS LP's earnings per share declined by 22.6% in the most recent quarter compared to the same quarter a year ago. Earnings per share have declined over the last two years. We anticipate that this should continue in the coming year. During the past fiscal year, EL PASO PIPELINE PARTNERS LP reported lower earnings of $1.86 versus $2.15 in the prior year. For the next year, the market is expecting a contraction of 7.0% in earnings ($1.73 versus $1.86).
- The debt-to-equity ratio is very high at 2.19 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with the unfavorable debt-to-equity ratio, EPB maintains a poor quick ratio of 0.81, which illustrates the inability to avoid short-term cash problems.