NEW YORK (TheStreet) -- Shares of Dresser-Rand Group Inc. (DRC) are higher by 12.21% to $81.95 at the start of trading on Friday, as the stock gets a boost from speculation Germany-based Siemens AG (SIEGY) is contemplating making a $6.5 billion bid for the company, Bloomberg Businessweek reports.
Dresser-Rand saw its stock rise on Wednesday and Thursday after the Swiss company Sulzer AG confirmed on its website that it was in talks with the company, a supplier of custom engineered rotating equipment for a variety of industries, regarding a possible merger.
In its statement Sulzer said there was no guarantee its talks with Dresser-Rand would result in a transaction.STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.
Siemens is looking to make a competing offer for the company and could vote on whether or not to submit a formal bid of $85 per share at a meeting on September 24, sources told Businessweek.
Separately, 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 some important positives, 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, largely solid financial position with reasonable debt levels by most measures and increase in stock price during the past year. 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:
- Net operating cash flow has significantly increased by 244.66% to $35.50 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 25.01%.
- DRESSER-RAND GROUP INC's earnings per share declined by 44.9% 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 ($2.60 versus $2.19).
- The revenue fell significantly faster than the industry average of 19.3%. Since the same quarter one year prior, revenues fell by 22.0%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- DRC's debt-to-equity ratio of 0.87 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 0.85 is weak.
- Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that the other strengths this company displays justify these higher price levels.
- You can view the full analysis from the report here: DRC Ratings Report