NEW YORK (TheStreet) -- Shares of oil drilling equipment provider National Oilwell Varco (NOV - Get Report) fell more than 5% to a 52-week low of $54.46 in early afternoon trading Wednesday as oil prices declined and after Credit Suisse downgraded the stock.
Credit Suisse lowered the stock to "underperform" from "neutral" and decreased its price target to $43 from $60.
Credit Suisse downgraded the stock "as it appears to be the most negatively impacted stock by the many negative data points coming through our 2-3 year outlook," according to the firm's research note.
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"An exceptionally well-managed company, NOV's Rig Systems business (44% of 2014E EBIT) will be negatively impacted by our expected lack of new deepwater rig orders through 2016 and its exposure to the North American, and international, activity slowdown due to the lower oil price," the firm continued.
WTI crude was down 2.62% to $45.02 as of 12:02 p.m., while Brent crude was down 1.23% to $48.99, according to CNBC.
Oil prices, which have fallen more than 50% since June 2014, have fallen to their lowest point in nearly six years in recent weeks amid a global oversupply. The supply glut coupled with aggressive exploration and production from many of the world's largest oil companies and OPEC's unwillingness to cut production have held down oil prices.
More than 5.2 million shares had changed hands as of 12:06 p.m., compared to the daily average volume of 5,139,080.
Separately, TheStreet Ratings team rates NATIONAL OILWELL VARCO INC as a "hold" with a ratings score of C+. TheStreet Ratings Team has this to say about their recommendation:
"We rate NATIONAL OILWELL VARCO INC (NOV) 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 revenue growth, largely solid financial position with reasonable debt levels by most measures and increase in net income. However, as a counter to these strengths, we also find weaknesses including weak operating cash flow, a generally disappointing performance in the stock itself and poor profit margins."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth came in higher than the industry average of 7.0%. Since the same quarter one year prior, revenues rose by 17.3%. Growth in the company's revenue appears to have helped boost the earnings per share.
- NOV's debt-to-equity ratio is very low at 0.15 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 1.19, which illustrates the ability to avoid short-term cash problems.
- NATIONAL OILWELL VARCO INC has improved earnings per share by 15.7% 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, NATIONAL OILWELL VARCO INC reported lower earnings of $5.16 versus $5.83 in the prior year. This year, the market expects an improvement in earnings ($6.01 versus $5.16).
- NOV has underperformed the S&P 500 Index, declining 12.97% from its price level of one year ago. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
- Net operating cash flow has decreased to $519.00 million or 48.56% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
- You can view the full analysis from the report here: NOV Ratings Report