NEW YORK (TheStreet) -- Shares of Dresser-Rand Group Inc. (DRC) are slightly lower on heavy trade volume after it was reported that the maker of oilfield equipment is working with Morgan Stanley (MS) to prepare for possible takeover bids from companies, including Siemens (SIEGY), sources told Bloomberg.
While Dresser-Rand isn't actively pursuing a sale, the company retained the financial adviser after potential suitors expressed interest, sources added.
Siemens has been considering a bid for some time and Switzerland-based Sulzer also previously discussed a potential merger with the company, sources said.
TheStreet Ratings team rates DRESSER-RAND GROUP INC as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:
"We rate DRESSER-RAND GROUP INC (DRC) a BUY. This is driven by a number of 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 good cash flow from operations and largely solid financial position with reasonable debt levels by most measures. 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:
- Net operating cash flow has significantly increased by 232.21% to $59.10 million when compared to the same quarter last year. In addition, DRESSER-RAND GROUP INC has also vastly surpassed the industry average cash flow growth rate of 22.16%.
- DRESSER-RAND GROUP INC's earnings per share declined by 48.8% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past year. However, we anticipate this trend reversing over the coming year. During the past fiscal year, DRESSER-RAND GROUP INC reported lower earnings of $2.19 versus $2.35 in the prior year. This year, the market expects an improvement in earnings ($2.65 versus $2.19).
- The revenue fell significantly faster than the industry average of 21.4%. Since the same quarter one year prior, revenues slightly dropped by 8.8%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- DRC's debt-to-equity ratio of 0.93 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Regardless of the somewhat mixed results with the debt-to-equity ratio, the company's quick ratio of 0.86 is weak.
- Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. When compared to other companies in the Energy Equipment & Services industry and the overall market, DRESSER-RAND GROUP INC's return on equity is below that of both the industry average and the S&P 500.
- You can view the full analysis from the report here: DRC Ratings Report