One Reason Encana (ECA) Stock Is Down Today

NEW YORK (TheStreet) -- Shares of Encana (ECA) were falling 4.7% to $17.31 after the oil and gas company announced it will complete its acquisition of Athlon Energy (ATHL) .

Encana said that the cash tender offer made by Alceno Acquisition, its indirect, wholly owned subsidiary to acquire all issued and outstanding shares of Athlon Energy expired at midnight ET, Nov. 12. The company expects to complete the offer and the merger of Alceno and Athlon Energy on Thursday.

The $7.1 billion acquisition will give Encana a 140,000 net acre position in the Permian Basin. The company expects the acquisition will add about 32,000 barrels of oil equivalent a day to its production.

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

"We rate ENCANA CORP (ECA) 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 reasonable valuation levels, good cash flow from operations and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself and unimpressive growth in net income."

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

  • Net operating cash flow has increased to $767.00 million or 38.44% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -2.53%.
  • ENCANA 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, ENCANA CORP turned its bottom line around by earning $0.31 versus -$3.79 in the prior year. This year, the market expects an improvement in earnings ($1.63 versus $0.31).
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Oil, Gas & Consumable Fuels industry. The net income has significantly decreased by 62.9% when compared to the same quarter one year ago, falling from $730.00 million to $271.00 million.
  • In its most recent trading session, ECA has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. Looking ahead, other than the push or pull of the broad market, we do not see anything in the company's numbers that may help reverse the decline experienced over the past 12 months. Despite the past decline, the stock is still selling for more than most others in its industry.
  • You can view the full analysis from the report here: ECA Ratings Report

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