NEW YORK (TheStreet) -- Rowan Companies (RDC) was gaining 0.7% to $31.94 Friday after signing a two-year drilling contract in the Gulf of Mexico with a subsidiary of Freeport-McMoRan Copper & Gold (FCX).
The contract is for the Rowan Relentless, the fourth and final drillship in Rowan's current construction program. The contract is expected to start in the third quarter of 2015, and will add about $425 million to Rowan's current contract backlog.
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TheStreet Ratings team rates ROWAN COMPANIES PLC as a Hold with a ratings score of C+. TheStreet Ratings Team has this to say about their recommendation:
"We rate ROWAN COMPANIES PLC (RDC) 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 largely solid financial position with reasonable debt levels by most measures, expanding profit margins and notable return on equity. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, weak operating cash flow and a generally disappointing performance in the stock itself."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- ROWAN COMPANIES PLC's earnings per share declined by 18.2% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, ROWAN COMPANIES PLC increased its bottom line by earning $2.04 versus $1.64 in the prior year. This year, the market expects an improvement in earnings ($2.41 versus $2.04).
- Despite currently having a low debt-to-equity ratio of 0.57, it is higher than that of the industry average, inferring that management of debt levels may need to be evaluated further. Even though the debt-to-equity ratio shows mixed results, the company's quick ratio of 6.08 is very high and demonstrates very strong liquidity.
- 41.64% is the gross profit margin for ROWAN COMPANIES PLC which we consider to be strong. Regardless of RDC's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, RDC's net profit margin of 15.78% compares favorably to the industry average.
- 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 12.5% when compared to the same quarter one year ago, dropping from $68.13 million to $59.60 million.
- Net operating cash flow has decreased to $80.52 million or 21.95% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- You can view the full analysis from the report here: RDC Ratings Report