NEW YORK (TheStreet) -- Shares of Hercules Offshore (HERO) are down 6.58% to $1.07 after Global Hunter Securites lowered their price target to 80 cents from 90 cents and restated their "reduce" rating.
The Texas-based shallow-water driller recently released its fleet status report that showed it now has 10 rigs "cold stacked," with four stacked since October.
Despite the massive sell-off in shares, Jefferies does not yet believe it is time to be long the Offshore Drilling subsector, as neither fundamentals nor valuation paint a compelling enough picture of the group, they said.
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Separately, TheStreet Ratings team rates HERCULES OFFSHORE INC as a Sell with a ratings score of D. TheStreet Ratings Team has this to say about their recommendation:
"We rate HERCULES OFFSHORE INC (HERO) a SELL. This is driven by a number of negative factors, 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, disappointing return on equity, poor profit margins, weak operating cash flow and generally high debt management risk."
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 Energy Equipment & Services industry. The net income has significantly decreased by 450.4% when compared to the same quarter one year ago, falling from $25.27 million to -$88.55 million.
- 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 Energy Equipment & Services industry and the overall market, HERCULES OFFSHORE INC's return on equity significantly trails that of both the industry average and the S&P 500.
- The gross profit margin for HERCULES OFFSHORE INC is currently lower than what is desirable, coming in at 34.07%. It has decreased significantly from the same period last year. Along with this, the net profit margin of -39.90% is significantly below that of the industry average.
- Net operating cash flow has significantly decreased to $21.74 million or 75.24% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- Currently the debt-to-equity ratio of 1.58 is quite high overall and when compared to the industry average, suggesting that the current management of debt levels should be re-evaluated. Regardless of the company's weak debt-to-equity ratio, HERO has managed to keep a strong quick ratio of 2.07, which demonstrates the ability to cover short-term cash needs.
- You can view the full analysis from the report here: HERO Ratings Report