NEW YORK (TheStreet) -- Shares of Laredo Petroleum (LPI) were down 3.03% to $9.59 in late morning trading Tuesday after Mizuho Securities downgraded the stock to "neutral" from "buy" and cut its price target to $10 from $24.
Bank of America/Merrill Lynch also downgraded the energy sector to "market weight" after OPEC decided last week not to cut oil production and to keep its target at 30 million barrels per day, a move that could leave the market oversupplied. The announcement sent oil prices spiraling downward.
"With the collapse in crude, the sector now trades at a 20% discount to the S&P 500, where it has historically traded in-line with the market, but further estimate cuts are likely to come, [as] prices are falling faster than earnings are deteriorating," the firm said.
The stock hit an intraday low of $9.34 as of 11:53 a.m., slightly greater than the 52-week low mark of $9.32.
Separately, TheStreet Ratings team rates LAREDO PETROLEUM INC as a "hold" with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:
"We rate LAREDO PETROLEUM INC (LPI) 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, impressive record of earnings per share growth and compelling growth in net income. However, as a counter to these strengths, we also find weaknesses including generally higher debt management risk and a generally disappointing performance in the stock itself."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth came in higher than the industry average of 6.4%. Since the same quarter one year prior, revenues rose by 17.2%. Growth in the company's revenue appears to have helped boost the earnings per share.
- LAREDO PETROLEUM 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. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, LAREDO PETROLEUM INC increased its bottom line by earning $0.85 versus $0.47 in the prior year. This year, the market expects an improvement in earnings ($0.97 versus $0.85).
- The gross profit margin for LAREDO PETROLEUM INC is currently very high, coming in at 80.22%. Regardless of LPI's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, LPI's net profit margin of 41.65% significantly outperformed against the industry.
- LPI'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 45.80%, 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. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
- The debt-to-equity ratio of 1.16 is relatively high when compared with the industry average, suggesting a need for better debt level management. To add to this, LPI has a quick ratio of 0.50, this demonstrates the lack of ability of the company to cover short-term liquidity needs.
- You can view the full analysis from the report here: LPI Ratings Report