One Factor Driving Linn Co. (LNCO) Stock Up Today

NEW YORK (TheStreet) -- Shares of Linn Co.  (LNCO) rose 8.3% to $9.92 in morning trading Tuesday as the energy sector rallied thanks in part to Repsol SA's $8.3 billion acquisition of Talisman Energy  (TLM) .

Repsol agreed to pay $8 per share for Calgary-based Talisman, a 60% premium to the average stock price during the past month, Talisman said. The Madrid-based company would also assume $4.7 billion in debt.

Linn Co. touched a 52-week low of $8.58 shortly after the market opened Tuesday after Robert W. Baird downgraded the stock to "neutral" from "outperform." But the energy sector rally pulled the stock higher after the initial dip.

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The rally occurred despite the continued plunge in oil prices. WTI Crude fell 2.7% to $54.39 a barrel on Tuesday, the lowest price in five-and-a-half years, according to USA Today.

Separately, TheStreet Ratings team rates LINNCO LLC as a "sell" with a ratings score of D. TheStreet Ratings Team has this to say about their recommendation:

"We rate LINNCO LLC (LNCO) 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 disappointing return on equity and generally disappointing historical performance in the stock itself."

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

  • 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, LINNCO LLC's return on equity significantly trails that of both the industry average and the S&P 500.
  • LNCO'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 61.47%, 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.
  • LINNCO LLC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, LINNCO LLC swung to a loss, reporting -$17.73 versus $0.60 in the prior year. This year, the market expects an improvement in earnings ($1.15 versus -$17.73).
  • The gross profit margin for LINNCO LLC is currently very high, coming in at 100.00%. LNCO has managed to maintain the strong profit margin since the same quarter of last year. Despite the mixed results of the gross profit margin, LNCO's net profit margin of 68.29% significantly outperformed against the industry.
  • Net operating cash flow has significantly increased by 267.62% to $92.69 million when compared to the same quarter last year. In addition, LINNCO LLC has also vastly surpassed the industry average cash flow growth rate of -1.58%.
  • You can view the full analysis from the report here: LNCO Ratings Report

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