Why Transocean (RIG) Shares Are Declining Today

NEW YORK (TheStreet) -- Transocean (RIG) shares are down 1.2% to $33.03 on Wednesday as the offshore driller suffered from falling oil prices.

The price of oil normally goes up when there is turmoil internationally, however tensions in the Middle East and sanctions against Russia have not affected the price of oil as it normally would.

The price of a barrel of oil has fallen by $15 since mid-summer to $91.56 by the close on Tuesday.STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

TheStreet Ratings team rates TRANSOCEAN LTD as a Hold with a ratings score of C+. TheStreet Ratings Team has this to say about their recommendation:

"We rate TRANSOCEAN LTD (RIG) 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 growth in earnings per share, compelling growth in net income and attractive valuation levels. However, as a counter to these strengths, we find that the stock has had a generally disappointing performance in the past year."

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

  • TRANSOCEAN LTD reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, TRANSOCEAN LTD increased its bottom line by earning $3.88 versus $2.24 in the prior year. This year, the market expects an improvement in earnings ($4.57 versus $3.88).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Energy Equipment & Services industry. The net income increased by 91.2% when compared to the same quarter one year prior, rising from $307.00 million to $587.00 million.
  • RIG, with its decline in revenue, underperformed when compared the industry average of 19.1%. Since the same quarter one year prior, revenues slightly dropped by 1.5%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. When compared to other companies in the Energy Equipment & Services industry and the overall market, TRANSOCEAN LTD's return on equity is below that of both the industry average and the S&P 500.
  • RIG's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 25.60%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
  • You can view the full analysis from the report here: RIG Ratings Report
STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

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