Why Seadrill (SDRL) Stock Is Falling Today

NEW YORK (TheStreet) -- Shares of Seadrill (SDRL) are down 2.46 to $30.11 after Morgan Stanley (MS) analysts said they don't think the offshore drilling company will cut its dividend as risks grow that it will.

"...Seadrill's contract backlog continues to provide cash flow visibility that could tide it through near-term rig market weakness. However, we now model for a flat dividend through 2016 vs. our prior expectation for dividend growth of 1 cwent per quarter past 2Q15," analysts Ole Slorer and Jacob Ng told Barron's.

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TheStreet Ratings team rates SEADRILL LTD as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:

"We rate SEADRILL LTD (SDRL) 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 notable return on equity and expanding profit margins. 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:

  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Energy Equipment & Services industry and the overall market, SEADRILL LTD's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • The gross profit margin for SEADRILL LTD is rather high; currently it is at 58.59%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 49.59% significantly outperformed against the industry average.
  • SDRL, with its decline in revenue, underperformed when compared the industry average of 19.4%. Since the same quarter one year prior, revenues slightly dropped by 3.6%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • SEADRILL LTD 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. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, SEADRILL LTD increased its bottom line by earning $5.47 versus $2.32 in the prior year. For the next year, the market is expecting a contraction of 44.4% in earnings ($3.04 versus $5.47).
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 30.00%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 64.87% compared to the year-earlier quarter. Looking ahead, the stock's sharp decline over the past year may have been what was needed in order to bring its value into alignment with its fundamentals and others in its industry.
  • You can view the full analysis from the report here: SDRL Ratings Report

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