NEW YORK (TheStreet) -- Jefferies downgraded Oceaneering International (OII) stock to "hold" from "buy" today and lowered its price target to $68 from $80 on the offshore oil and gas services company.
"Our downgrade reflects modest caution across the company's deepwater businesses. In particular, we can imagine a less robust year for installation-related activity in Projects and Products following a relatively quiet year in subsea hardware orders in 2014," analysts said.
"We do lower OII's ROV utilization assumptions, in part to reflect risk of more aggressive than expected retirements and lower utilization across the floater fleet (including some risk of additional delays in putting newbuild drillships to work through 2015) and in part to reflect risk of lower utilization with field support vessels," analysts continued.
"Finally, we have lowered our terminal growth rate to 2.5% from 3% to reflect the more subdued growth outlook. We note that we think the greatest risk to our more negative view is OII's ability to gain/create market share in its life-of-field offerings through its innovative ROV Tooling products," analysts added.
Shares of Oceaneering International are down 0.45% to $61.66 in pre-market trading.
Separately, TheStreet Ratings team rates OCEANEERING INTERNATIONAL as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:
"We rate OCEANEERING INTERNATIONAL (OII) a BUY. This is driven by a number of strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its impressive record of earnings per share growth, compelling growth in net income, revenue growth, largely solid financial position with reasonable debt levels by most measures and notable return on equity. We feel these strengths outweigh the fact that the company shows weak operating cash flow."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- OCEANEERING INTERNATIONAL has improved earnings per share by 20.8% 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. During the past fiscal year, OCEANEERING INTERNATIONAL increased its bottom line by earning $3.42 versus $2.66 in the prior year. This year, the market expects an improvement in earnings ($3.99 versus $3.42).
- The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and the Energy Equipment & Services industry average. The net income increased by 19.1% when compared to the same quarter one year prior, going from $104.41 million to $124.34 million.
- Despite its growing revenue, the company underperformed as compared with the industry average of 16.0%. Since the same quarter one year prior, revenues rose by 14.0%. Growth in the company's revenue appears to have helped boost the earnings per share.
- OII's debt-to-equity ratio is very low at 0.12 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.37, which illustrates the ability to avoid short-term cash problems.
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Energy Equipment & Services industry and the overall market on the basis of return on equity, OCEANEERING INTERNATIONAL has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
- You can view the full analysis from the report here: OII Ratings Report