Why CVR Refining (CVRR) Stock Is Lower Today

NEW YORK (TheStreet) -- CVR Refining (CVRR) stock is dropping on Wednesday after announcing and pricing a public offering of 6.5 million common units of stock at $26.07 per share. Underwriters have also been granted the option to purchase up to an additional 975,000 shares. 

Credit Suisse, Barclays, Citigroup, Jefferies, JPMorgan, Morgan Stanley and UBS are acting as joint book-running managers. The offering is expected to close on June 30. 

By midmorning, shares had dropped 8.2% to $24.91. Trading volume of 4.4 million shares was 11 times its three-month daily average. 

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Separately, TheStreet Ratings team rates CVR REFINING LP as a Hold with a ratings score of C-. TheStreet Ratings Team has this to say about their recommendation:

"We rate CVR REFINING LP (CVRR) 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, largely solid financial position with reasonable debt levels by most measures and notable return on equity. However, as a counter to these strengths, we also find weaknesses including poor profit margins and a generally disappointing performance in the stock itself."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • CVRR's revenue growth has slightly outpaced the industry average of 3.2%. Since the same quarter one year prior, revenues slightly increased by 4.5%. 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.
  • The current debt-to-equity ratio, 0.34, is low and is below the industry average, implying that there has been successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.42, which illustrates the ability to avoid short-term cash problems.
  • Net operating cash flow has slightly increased to $258.20 million or 7.78% when compared to the same quarter last year. Despite an increase in cash flow, CVR REFINING LP's average is still marginally south of the industry average growth rate of 17.51%.
  • Reflecting the weaknesses we have cited, including the decline in the company's earnings per share, CVRR has underperformed the S&P 500 Index, declining 11.70% 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 CVR REFINING LP is currently extremely low, coming in at 8.96%. It has decreased from the same quarter the previous year. Regardless of the weak results of the gross profit margin, the net profit margin of 11.17% is above that of the industry average.
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