The firm noted the company underperformed in the sector but contends that the settlement of the Tronox case removes major overhang from the stock.
Late last week, news broke that Anadarko and its Kerr-McGee unit would pay $5.15 billion in the settlement. Creditors of the bankrupt paint materials maker Tronox filed a $20.8 billion environmental damage claim against Anadarko's Kerr-McGee unit. U.S. Bankruptcy Judge Allan Gropper ruled in December that Kerr-McGee improperly unloaded its environmental liabilities into Tronox before Anadarko took it over.
Anadarko Petroleum Corp. fell 2.1% to $98.93 at 11:11 a.m. on Monday.
TheStreet Ratings team rates ANADARKO PETROLEUM CORP as a "hold" with a ratings score of C+. TheStreet Ratings Team has this to say about their recommendation:
"We rate ANADARKO PETROLEUM CORP (APC) 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, expanding profit margins and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and weak operating cash flow."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth came in higher than the industry average of 7.8%. Since the same quarter one year prior, revenues rose by 14.9%. 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 gross profit margin for ANADARKO PETROLEUM CORP is rather high; currently it is at 68.55%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of -19.64% is in-line with the industry average.
- APC's debt-to-equity ratio of 0.62 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Regardless of the somewhat mixed results with the debt-to-equity ratio, the company's quick ratio of 1.13 is sturdy.
- 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 479.3% when compared to the same quarter one year ago, falling from $203.00 million to -$770.00 million.
- Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, ANADARKO PETROLEUM CORP's return on equity significantly trails that of both the industry average and the S&P 500.
- You can view the full analysis from the report here: APC Ratings Report