NEW YORK (TheStreet) -- Shares of Exterran Holdings Inc. (EXH) are higher by 8.59% to $36.67 in mid-morning trading on Monday, after the company announced its plan to spin off its international and fabrication businesses into a new publicly traded company, "SpinCo."
The new company's businesses will consist of Exterran Holdings' current international contract operations, and aftermarket services business, the company said.
After the transaction is completed Exterran Holdings, "RemainCo," will be a "pre-play U.S. compression services business," holding interests in Exterran Partners L.P. (EXLP) , the company added.STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.
"This transaction is an extension of our efforts to enhance the performance and unlock the value of all the businesses in the Exterran Holdings portfolio and is consistent with the board of directors' commitment to create long-term, sustainable shareholder value," said Exterran Holdings' CEO Brad Childers.
"We believe creating two separate entities, each focused on its unique performance improvement and growth initiatives, will further enhance the competitive position of each business in the U.S. and global oil and gas production infrastructure markets," Childers added.
The company said it expects the spinoff to take place during the second half of 2015.
Separately, TheStreet Ratings team rates EXTERRAN HOLDINGS INC as a Buy with a ratings score of B-. TheStreet Ratings Team has this to say about their recommendation:
"We rate EXTERRAN HOLDINGS INC (EXH) 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. Among the primary strengths of the company is its expanding profit margins over time. 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:
- 36.82% is the gross profit margin for EXTERRAN HOLDINGS INC which we consider to be strong. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 4.70% trails the industry average.
- EXH, with its decline in revenue, underperformed when compared the industry average of 15.4%. Since the same quarter one year prior, revenues slightly dropped by 6.7%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- EXTERRAN HOLDINGS INC's earnings per share declined by 41.0% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, EXTERRAN HOLDINGS INC turned its bottom line around by earning $0.89 versus -$1.68 in the prior year. For the next year, the market is expecting a contraction of 14.0% in earnings ($0.77 versus $0.89).
- In its most recent trading session, EXH 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, 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.
- 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 Energy Equipment & Services industry. The net income has decreased by 16.9% when compared to the same quarter one year ago, dropping from $40.98 million to $34.05 million.
- You can view the full analysis from the report here: EXH Ratings Report