NEW YORK (TheStreet) -- Shares of Southcross Energy LLC (SXE) are up 12.78% to $20.93 on Thursday.
Southcross Energy said it will combine with TexStar Midstream Services, a privately held gas gathering and processing company.
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After the transaction closes, a newly formed company, Southcross Holdings LP will own 100% of the general partner of Southcross and equity interests in Southcross as well as former TexStar assets.
EIG Global Energy Partners, Charlesbank Capital Partners and Tailwater Capital will each indirectly own approximately one-third of Holdings.
Separately, TheStreet Ratings team rates SOUTHCROSS ENERGY PRTNRS LP as a Sell with a ratings score of D+. TheStreet Ratings Team has this to say about their recommendation:
"We rate SOUTHCROSS ENERGY PRTNRS LP (SXE) a SELL. This is driven by a few notable weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its generally disappointing historical performance in the stock itself and poor profit margins."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- SXE has underperformed the S&P 500 Index, declining 13.46% 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 gross profit margin for SOUTHCROSS ENERGY PRTNRS LP is currently extremely low, coming in at 4.93%. Regardless of SXE's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of -0.60% trails the industry average.
- Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, SOUTHCROSS ENERGY PRTNRS LP's return on equity significantly trails that of both the industry average and the S&P 500.
- The current debt-to-equity ratio, 0.38, is low and is below the industry average, implying that there has been successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.88 is somewhat weak and could be cause for future problems.
- Net operating cash flow has significantly increased by 928.52% to $14.18 million when compared to the same quarter last year. In addition, SOUTHCROSS ENERGY PRTNRS LP has also vastly surpassed the industry average cash flow growth rate of 17.43%.
- You can view the full analysis from the report here: SXE Ratings Report