Story updated at 9:55 a.m. to reflect market activity.
Ensco gained 0.15 to $50.07 in morning trading.
The analyst firm set a price target of $56 for the company. According to Jefferies analysts, the downgrade was driven by displacement of jackups.
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Separately, TheStreet Ratings team rates ENSCO PLC as a Hold with a ratings score of C+. TheStreet Ratings Team has this to say about their recommendation:
"We rate ENSCO PLC (ESV) 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 good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, a generally disappointing performance in the stock itself and feeble growth in the company's earnings per share."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Despite its growing revenue, the company underperformed as compared with the industry average of 10.9%. Since the same quarter one year prior, revenues slightly increased by 3.2%. 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.
- 47.09% is the gross profit margin for ENSCO PLC which we consider to be strong. Regardless of ESV's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, ESV's net profit margin of 24.64% significantly outperformed against the industry.
- Net operating cash flow has increased to $416.60 million or 21.70% when compared to the same quarter last year. Despite an increase in cash flow, ENSCO PLC's cash flow growth rate is still lower than the industry average growth rate of 49.68%.
- Reflecting the weaknesses we have cited, including the decline in the company's earnings per share, ESV has underperformed the S&P 500 Index, declining 18.52% from its price level of one year ago. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
- 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 Energy Equipment & Services industry. The net income has decreased by 7.8% when compared to the same quarter one year ago, dropping from $317.10 million to $292.50 million.
- You can view the full analysis from the report here: ESV Ratings Report