Oi S.A. (OIBR) Stock Plunges Today After Shareholder Compensation Policy Cancellation

NEW YORK (TheStreet) -- Shares of Oi S.A.  (OIBR) plunged 10.43% to $1.89 in late morning trading Friday after the Brazilian telecommunications company canceled its shareholder compensation policy.

OIBR announced to its shareholders and the public its board of directors had approved the cancellation of the shareholder compensation policy for the fiscal years 2013 through 2016. The company had previously disclosed the policy on August 13, 2013.

The stock surged last week after the Central Bank of Brazil increased its interest rate by 50 basis points to 12.25%, the highest level since August 2011.

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More than 3 million shares had changed hands as of 11:53 a.m., compared to the daily average volume of 2,273,270.

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

"We rate OI SA (OIBR) a SELL. This is driven by several weaknesses, 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 feeble growth in its earnings per share, unimpressive growth in net income, generally high debt management risk, disappointing return on equity and weak operating cash flow."

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

  • OI SA 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. During the past fiscal year, OI SA reported lower earnings of $3.90 versus $7.93 in the prior year.
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed against the S&P 500 and did not exceed that of the Diversified Telecommunication Services industry. The net income has significantly decreased by 96.3% when compared to the same quarter one year ago, falling from $77.29 million to $2.82 million.
  • Although OIBR's debt-to-equity ratio of 2.18 is very high, it is currently less than that of the industry average. To add to this, OIBR has a quick ratio of 0.69, this demonstrates the lack of ability of the company to cover short-term liquidity needs.
  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. In comparison to the other companies in the Diversified Telecommunication Services industry and the overall market, OI SA's return on equity is significantly below that of the industry average and is below that of the S&P 500.
  • Net operating cash flow has decreased to $725.79 million or 25.70% when compared to the same quarter last year. In conjunction, when comparing current results to the industry average, OI SA has marginally lower results.
  • You can view the full analysis from the report here: OIBR Ratings Report

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