The bank cut its rating for Hercules Offshore to "sell" from "neutral," cutting its price target to $3.60 from $4.60.
"We also cut our 2014/15 EBITDA by 25%/13%," analyst Waqar Syed wrote. "After the close on June 19, HERO announced contract cancellation for 2 jack-ups putting at risk ~$300mn of revenues modeled for the next 3 years. While the stock's 11.7% fall on June 20 somewhat reflects this news, it doesn't fully incorporate weakening near-to-medium term fundamentals. Moreover, revised consensus estimates are still too high, in our view. HERO's GOM based jack-up fleet faces utilization challenges owing to hurricane season, customer consolidation and likely influx of rigs from Mexico."
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Separately, TheStreet Ratings team rates HERCULES OFFSHORE INC as a Hold with a ratings score of C-. TheStreet Ratings Team has this to say about their recommendation:
"We rate HERCULES OFFSHORE INC (HERO) 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 robust revenue growth and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and weak operating cash flow."