The firm lowered the Colombia holding company's rating based on a valuation call and concern the upcoming dividend payment will cause a sell-off.
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Highlights from the analysis by TheStreet Ratings Team goes as follows:
- ECOPETROL SA's earnings per share declined by 42.7% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past two years. However, we anticipate this trend to reverse over the coming year. During the past fiscal year, ECOPETROL SA reported lower earnings of $3.31 versus $4.10 in the prior year. This year, the market expects an improvement in earnings ($3.36 versus $3.31).
- EC, with its decline in revenue, slightly underperformed the industry average of 7.7%. Since the same quarter one year prior, revenues fell by 16.0%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- The share price of ECOPETROL SA has not done very well: it is down 17.19% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. Looking ahead, although the push and pull of the overall market trend could certainly make a critical difference, we do not see any strong reason stemming from the company's fundamentals that would cause a continuation of last year's decline. In fact, the stock is now selling for less than others in its industry in relation to its current earnings.
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed against the S&P 500 and did not exceed that of the Oil, Gas & Consumable Fuels industry. The net income has significantly decreased by 45.3% when compared to the same quarter one year ago, falling from $2,220.02 million to $1,214.16 million.
- You can view the full analysis from the report here: EC Ratings Report