The firm believes that offshore oil rig fleets are experiencing market recapitalization and that offshore drilling companies' bottom lines could be in store for stormy weather in the near term.
Transocean in particular may be forced to cut its dividend as a result or the shift, analysts said.
Separately, TheStreet Ratings team rates TRANSOCEAN LTD as a Buy with a ratings score of B-. TheStreet Ratings Team has this to say about their recommendation:
"We rate TRANSOCEAN LTD (RIG) 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 impressive record of earnings per share growth, compelling growth in net income, revenue growth, attractive valuation levels and expanding profit margins. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- TRANSOCEAN LTD has improved earnings per share by 42.7% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, TRANSOCEAN LTD increased its bottom line by earning $3.87 versus $2.24 in the prior year. This year, the market expects an improvement in earnings ($4.21 versus $3.87).
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Energy Equipment & Services industry. The net income increased by 42.0% when compared to the same quarter one year prior, rising from $321.00 million to $456.00 million.
- RIG's revenue growth trails the industry average of 21.4%. Since the same quarter one year prior, revenues slightly increased by 7.1%. Growth in the company's revenue appears to have helped boost the earnings per share.
- 45.75% is the gross profit margin for TRANSOCEAN LTD which we consider to be strong. It has increased from the same quarter the previous year. Along with this, the net profit margin of 19.49% is above that of the industry average.
- You can view the full analysis from the report here: RIG Ratings Report