NEW YORK (TheStreet) -- Shares of Apache Corp. (APA) are up 4.76% to $103.25 in pre-market trade after activist investor Jana Partners LLC, which has built a stake worth over $1 billion in the independent energy company, is calling for them to sell off its international holdings to drill exclusively on American soil, according to the Wall Street Journal.
"Investors are unimpressed by [Apache]'s global diversification and have voted with their feet," Jana wrote in a letter to investors yesterday that was seen by the Journal.
TheStreet Ratings team rates APACHE CORP as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:
"We rate APACHE CORP (APA) a BUY. This is driven by multiple 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 attractive valuation levels, expanding profit margins, solid stock price performance, largely solid financial position with reasonable debt levels by most measures and notable return on equity. 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:
- APACHE CORP reported flat earnings per share in the most recent quarter. 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, APACHE CORP increased its bottom line by earning $5.63 versus $4.91 in the prior year. This year, the market expects an improvement in earnings ($7.07 versus $5.63).
- The gross profit margin for APACHE CORP is currently very high, coming in at 76.75%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 6.47% trails the industry average.
- APA's debt-to-equity ratio is very low at 0.29 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 0.95 is somewhat weak and could be cause for future problems.
- Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of 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.
- You can view the full analysis from the report here: APA Ratings Report