NEW YORK (TheStreet) -- Shares of Teekay (TK - Get Report) are skyrocketing 14.46% to $66.80 on heavy trading volume Tuesday after the company adopted a new dividend policy and announced its plans late Monday to increase its dividend by 75% to 80%.
The crude oil and gas marine transportation services company plans to increase its annualized cash dividend to between $2.20 and $2.30 a share beginning in the first quarter of 2015.
About 2.56 million shares of Teekay were traded as of 12:23 p.m. Tuesday, compared to the normal volume of about 456,000 shares a day.
Deutsche Bank upgraded the stock to "buy" from "hold" and raised its price target to $90 from $60 on Tuesday. The firm cited the company's "bold new dividend strategy."
Separately, TheStreet Ratings team rates TEEKAY CORP as a "hold" with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:
"We rate TEEKAY CORP (TK) 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, solid stock price performance and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, generally higher debt management risk and disappointing return on equity."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- TK's revenue growth has slightly outpaced the industry average of 3.0%. Since the same quarter one year prior, revenues slightly increased by 5.0%. 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.
- Compared to its closing price of one year ago, TK's share price has jumped by 34.87%, exceeding the performance of the broader market during that same time frame. Regarding the stock's future course, our hold rating indicates that we do not recommend additional investment in this stock despite its gains in the past year.
- TEEKAY CORP 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. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, TEEKAY CORP continued to lose money by earning -$1.62 versus -$2.30 in the prior year. This year, the market expects an improvement in earnings ($0.25 versus -$1.62).
- The debt-to-equity ratio is very high at 6.73 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with the unfavorable debt-to-equity ratio, TK maintains a poor quick ratio of 0.90, which illustrates the inability to avoid short-term cash problems.
- 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 Oil, Gas & Consumable Fuels industry and the overall market, TEEKAY CORP's return on equity significantly trails that of both the industry average and the S&P 500.
- You can view the full analysis from the report here: TK Ratings Report