NEW YORK (TheStreet) -- Shares of Hess Corp. (HES) are up 1.91% to $91.01 in pre-market trade after the integrated energy company announced that it agreed to sell its retail business to Marathon Petroleum Corp. (MRO) for $2.6 billion.
Hess Retail is the largest chain of company operated gas stations and convenience stores along the east coast with 1,342 locations.
Proceeds from the sale will be used for additional share repurchases and the company has increased its existing share repurchase authorization from $4 billion to $6.5 billion.
"We rate HESS CORP (HES) a BUY. This is driven by a few notable strengths, 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 reasonable valuation levels, good cash flow from operations, solid stock price performance, largely solid financial position with reasonable debt levels by most measures and expanding profit margins. 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:
- Net operating cash flow has increased to $1,158.00 million or 41.39% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 18.91%.
- Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period, despite the company's weak earnings results. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
- HES's debt-to-equity ratio is very low at 0.23 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.75 is somewhat weak and could be cause for future problems.
- 37.88% is the gross profit margin for HESS CORP which we consider to be strong. Regardless of HES's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, HES's net profit margin of 6.94% compares favorably to the industry average.
- You can view the full analysis from the report here: HES Ratings Report