Why Summit Midstream Partners (SMLP) Stock Is Falling Today

NEW YORK (TheStreet) -- Shares of Summit Midstream Partners LP (SMLP) are falling, down -6.15% to $52.67 in midday trading, after the company announced the pricing of an underwritten public offering of 4,347,826 common shares at a price of $53.88 per common share.

The offering was up-sized from the previous 4 million shares, and is scheduled to close on Sept. 9.

Summit Midstream Partners will not receive the net proceeds from this offering and the its outstanding common shares will remain unchanged.

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

"We rate SUMMIT MIDSTREAM PARTNERS LP (SMLP) 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 solid stock price performance. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and weak operating cash flow."

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

  • The revenue growth came in higher than the industry average of 3.5%. Since the same quarter one year prior, revenues rose by 13.1%. 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 debt-to-equity ratio is somewhat low, currently at 0.68, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.24, which illustrates the ability to avoid short-term cash problems.
  • Compared to its closing price of one year ago, SMLP's share price has jumped by 63.23%, exceeding the performance of the broader market during that same time frame. Setting our sights on the months ahead, however, we feel that the stock's sharp appreciation over the last year has driven it to a price level which is now relatively expensive compared to the rest of its industry. The implication is that its reduced upside potential is not good enough to warrant further investment at this time.
  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, SUMMIT MIDSTREAM PARTNERS LP's return on equity significantly trails that of both the industry average and the S&P 500.
  • Net operating cash flow has decreased to $32.19 million or 28.03% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
  • You can view the full analysis from the report here: SMLP Ratings Report

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