Newfield Exploration Company Stock Upgraded (NFX)

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) -- Newfield Exploration Company (NYSE: NFX) has been upgraded by TheStreet Ratings from sell to hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, impressive record of earnings per share growth and compelling growth in net income. However, as a counter to these strengths, we find that the company has favored debt over equity in the management of its balance sheet.

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Highlights from the ratings report include:
  • The revenue growth greatly exceeded the industry average of 7.8%. Since the same quarter one year prior, revenues rose by 41.5%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • NEWFIELD EXPLORATION CO reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, NEWFIELD EXPLORATION CO turned its bottom line around by earning $0.80 versus -$6.70 in the prior year. This year, the market expects an improvement in earnings ($1.89 versus $0.80).
  • Compared to where it was a year ago today, the stock is now trading at a higher level, reflecting both the market's overall trend during that period and the fact that the company's earnings growth has been robust. We feel that the combination of its price rise over the last year and its current price-to-earnings ratio relative to its industry tend to reduce its upside potential.
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, NEWFIELD EXPLORATION CO's return on equity significantly trails that of both the industry average and the S&P 500.
  • The debt-to-equity ratio of 1.25 is relatively high when compared with the industry average, suggesting a need for better debt level management. To add to this, NFX has a quick ratio of 0.51, this demonstrates the lack of ability of the company to cover short-term liquidity needs.

Newfield Exploration Company, an independent energy company, is engaged in the exploration, development, and production of crude oil, natural gas, and natural gas liquids. Its primary areas of operation include the Mid-Continent, the Rocky Mountains, and onshore Gulf Coast. Newfield has a market cap of $3.92 billion and is part of the basic materials sector and energy industry. Shares are up 16.6% year to date as of the close of trading on Monday.

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

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Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.

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