BP (BP) Stock Gains Today on Royal Dutch Shell Merger Talk

NEW YORK (TheStreet) -- BP (BP) shares are climbing, up 2.4% to $40.79 in trading on Tuesday, following reports that the oil company was considering a takeover bid from rival Royal Dutch Shell  (RDS.A) , according to Reuters

There are not any specific numbers available as both companies have declined to comment on the report.

The Reuters report does quote an analysts at IG who believes that the likelihood of a merger in the current climate with oil prices falling to multiyear lows is far fetched. "It seems difficult to believe that Shell would make such a big acquisition at this difficult time for the oil market," analyst Chris Beauchamp told the news service.

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

"We rate BP PLC (BP) 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 largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and poor profit margins."

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

  • Net operating cash flow has increased to $9,399.00 million or 48.43% when compared to the same quarter last year. In addition, BP PLC has also vastly surpassed the industry average cash flow growth rate of -1.64%.
  • The current debt-to-equity ratio, 0.43, is low and is below the industry average, implying that there has been successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.98 is somewhat weak and could be cause for future problems.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. In comparison to the other companies in the Oil, Gas & Consumable Fuels industry and the overall market, BP PLC's return on equity is significantly below that of the industry average and is below that of the S&P 500.
  • The gross profit margin for BP PLC is currently extremely low, coming in at 11.86%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 1.37% trails that of the industry average.
  • You can view the full analysis from the report here: BP Ratings Report
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