Key Energy Services Inc Stock Downgraded (KEG)

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

NEW YORK ( TheStreet) -- Key Energy Services (NYSE: KEG) has been downgraded by TheStreet Ratings from hold to sell. The company's weaknesses can be seen in multiple areas, such as its feeble growth in its earnings per share, deteriorating net income, disappointing return on equity, poor profit margins and generally disappointing historical performance in the stock itself.

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Highlights from the ratings report include:
  • KEY ENERGY SERVICES INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. Earnings per share have declined over the last two years. We anticipate that this should continue in the coming year. During the past fiscal year, KEY ENERGY SERVICES INC swung to a loss, reporting -$0.14 versus $0.68 in the prior year. For the next year, the market is expecting a contraction of 128.6% in earnings (-$0.32 versus -$0.14).
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Energy Equipment & Services industry. The net income has significantly decreased by 1164.4% when compared to the same quarter one year ago, falling from -$4.13 million to -$52.20 million.
  • 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. Compared to other companies in the Energy Equipment & Services industry and the overall market, KEY ENERGY SERVICES INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for KEY ENERGY SERVICES INC is currently extremely low, coming in at 10.13%. It has decreased significantly from the same period last year. Along with this, the net profit margin of -14.88% is significantly below that of the industry average.
  • The share price of KEY ENERGY SERVICES INC has not done very well: it is down 9.87% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.

Key Energy Services, Inc. operates as an onshore rig-based well servicing contractor in the United States and internationally. The company operates in U.S. and International segments. Key Energy Services has a market cap of $925.8 million and is part of the basic materials sector and energy industry. Shares are down 23.7% year to date as of the close of trading on Monday.

Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.

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