NEW YORK (TheStreet) -- Shares of Rosetta Resources Inc. (ROSE) are higher by 0.50% to $37.46 in pre-market trading on Thursday, following a ratings upgrade to "outperform" from "market perform" at BMO Capital.
The firm said it raised its rating on the independent exploration and production company based on its belief Rosetta Resources will be able to deliver positive debt-adjusted growth and improved capital efficiency in 2015 and for years after.
BMO Capital also said the company has an attractive risk/reward and strong fundamentals.STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.
BMO Capital raised its price target on Rosetta Resources to $50 from $47.
Separately, TheStreet Ratings team rates ROSETTA RESOURCES INC as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:
"We rate ROSETTA RESOURCES INC (ROSE) 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 robust revenue growth, attractive valuation levels and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including generally higher debt management risk, disappointing return on equity and a generally disappointing performance in the stock itself."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- ROSE's very impressive revenue growth greatly exceeded the industry average of 6.7%. Since the same quarter one year prior, revenues leaped by 87.9%. Growth in the company's revenue appears to have helped boost the earnings per share.
- ROSETTA RESOURCES INC 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. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, ROSETTA RESOURCES INC increased its bottom line by earning $3.43 versus $3.01 in the prior year. For the next year, the market is expecting a contraction of 20.4% in earnings ($2.73 versus $3.43).
- The debt-to-equity ratio of 1.29 is relatively high when compared with the industry average, suggesting a need for better debt level management. To add to this, ROSE has a quick ratio of 0.51, this demonstrates the lack of ability of the company to cover short-term liquidity needs.
- 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. In comparison to the other companies in the Oil, Gas & Consumable Fuels industry and the overall market, ROSETTA RESOURCES INC's return on equity is significantly below that of the industry average and is below that of the S&P 500.
- You can view the full analysis from the report here: ROSE Ratings Report