Brent crude was up 0.57% to $70.94 on Wednesday.
The stock recovered after Tuesday's decline, which stemmed partially from Bank of America/Merrill Lynch's downgrade of the energy sector to "market weight."
The firm made the move 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.
Bank of America now expects Brent crude oil prices in the range of $70 to $75 for 2015. The firm also expects WTI crude prices to drop to $50 in the next month.
"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.
Separately, TheStreet Ratings team rates GOODRICH PETROLEUM CORP as a Sell with a ratings score of D. TheStreet Ratings Team has this to say about their recommendation:
"We rate GOODRICH PETROLEUM CORP (GDP) a SELL. This is driven by some concerns, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, generally high debt management risk, disappointing return on equity, generally disappointing historical performance in the stock itself and feeble growth in its earnings per share."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- 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 194.3% when compared to the same quarter one year ago, falling from -$27.09 million to -$79.71 million.
- The debt-to-equity ratio is very high at 2.84 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with this, the company manages to maintain a quick ratio of 0.41, which clearly demonstrates the inability to cover short-term cash needs.
- 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. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, GOODRICH PETROLEUM CORP's return on equity significantly trails that of both the industry average and the S&P 500.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 54.19%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 120.22% compared to the year-earlier quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
- GOODRICH PETROLEUM 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. The company has reported a trend of declining earnings per share over the past two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, GOODRICH PETROLEUM CORP reported poor results of -$2.99 versus -$2.48 in the prior year. This year, the market expects an improvement in earnings (-$1.91 versus -$2.99).
- You can view the full analysis from the report here: GDP Ratings Report