NEW YORK (TheStreet) -- Shares of Atwood Oceanics (ATW  are up 1.12% to $34.89 in morning trading Wednesday after BMO Capital Markets initiated coverage with a "market perform" rating and a $34 price target. 

"We like Atwood's high-specification floater fleet... While it is our favorite offshore driller, our negative view of the sub-sector keeps us Market Perform," BMO analysts said.  

Challenges lie ahead for offshore drillers, given the view that floater demand is likely to decline 10%-15% combined with a cumulative supply increase of 26% between now and 2018, analysts noted. 

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Atwood Oceanics posted lower earnings of $4.84 per share for its 2014 fiscal year versus $5.32 per share in 2013, but higher revenue of $1.17 billion versus $1.06 billion in 2013.   


Analysts forecast earnings of $6.63 and $5.14 per share and revenues of $1.41 billion and $1.34 billion in fiscal years 2015 and 2016, respectively. 

Atwood Oceanics is a global offshore drilling contractor engaged in the drilling and completion of exploratory and developmental oil and gas wells.

Separately, TheStreet Ratings team rates ATWOOD OCEANICS as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:

"We rate ATWOOD OCEANICS (ATW) 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, expanding profit margins and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity, a generally disappointing performance in the stock itself and feeble growth in the company's earnings per share."

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

  • The revenue growth came in higher than the industry average of 11.1%. Since the same quarter one year prior, revenues rose by 23.5%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • The gross profit margin for ATWOOD OCEANICS is rather high; currently it is at 57.82%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 13.14% is above that of the industry average.
  • ATW's debt-to-equity ratio of 0.67 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Despite the fact that ATW's debt-to-equity ratio is mixed in its results, the company's quick ratio of 2.16 is high and demonstrates strong liquidity.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 29.05%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 44.53% compared to the year-earlier quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
  • 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. When compared to other companies in the Energy Equipment & Services industry and the overall market, ATWOOD OCEANICS's return on equity is below that of both the industry average and the S&P 500.
  • You can view the full analysis from the report here: ATW Ratings Report