Will This Downgrade Hurt Continental Resources (CLR)Today?

NEW YORK (TheStreet) -- Continental Resources (CLR) was downgraded to "neutral" from "buy," UBS said Thursday. However, the firm upped its price target to $130 from $124. Analysts said the revision was a valuation call given shares appear "fairly valued" and with a slowdown of net asset value growth.

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Separately, TheStreet Ratings team rates CONTINENTAL RESOURCES INC as a Buy with a ratings score of B. The team has this to say about their recommendation:

"We rate CONTINENTAL RESOURCES INC (CLR) a BUY. This is driven by some important positives, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its robust revenue growth, good cash flow from operations, expanding profit margins and solid stock price performance. We feel these strengths outweigh the fact that the company has had sub par growth in net income."

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

  • The revenue growth came in higher than the industry average of 3.8%. Since the same quarter one year prior, revenues rose by 19.1%. 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 $584.84 million or 20.79% when compared to the same quarter last year. In addition, CONTINENTAL RESOURCES INC has also vastly surpassed the industry average cash flow growth rate of -52.18%.
  • The gross profit margin for CONTINENTAL RESOURCES INC is currently very high, coming in at 79.13%. Regardless of CLR's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, CLR's net profit margin of 16.19% significantly outperformed against the industry.
  • Compared to its closing price of one year ago, CLR's share price has jumped by 41.02%, exceeding the performance of the broader market during that same time frame. Looking ahead, the stock's sharp rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
  • CONTINENTAL RESOURCES INC's earnings per share declined by 39.5% in the most recent quarter compared to 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, CONTINENTAL RESOURCES INC increased its bottom line by earning $4.14 versus $4.06 in the prior year. This year, the market expects an improvement in earnings ($6.90 versus $4.14).

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

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