NEW YORK (TheStreet) -- Shares of Chesapeake Energy Corp (CHK) were slipping, down 2.53% to $14.62 in afternoon trading Monday, after analysts at Goldman Sachs downgraded the company to "neutral" from "buy" this morning.
Goldman analysts also lowered their price target to $16 from $19.
The firm cited its reduced commodity price outlook that could pressure Chesapeake's balance sheet, given increasing operating leverage to commodity prices and minimum volume contracts.
Goldman Sachs reduced its forecasts on a persistently high supply outlook.
Goldman lowered its 2016 to 2019 Brent crude price assumption to a range of between $62 to $65 a barrel, down from its previous $70 per barrel.
For 2020, the firm issued Brent crude price assumption of $55 a barrel from $70 a barrel.
The firm also raised its 2015 price assumption to $58 a barrel from $52 a barrel.
"We see global oil demand being met by U.S. shale, which is continuing to benefit from efficiency and productivity improvements, and OPEC," said Goldman analysts in a report.
Brent crude for July delivery was down 0.85% to $66.24 a barrel as of 12:16 p.m. ET today, while U.S. crude for June delivery fell 0.28% to $59.52 a barrel.
Oklahoma City, Okla.-based Chesapeake is a producer of natural gas and liquids. The company's exploration and production segment is responsible for finding and producing natural gas, oil and natural gas liquids.
The company owns interests in approximately 47,400 natural gas and oil wells with positions in the resource plays including the Eagle Ford Shale, and the Utica Shale.
Separately, TheStreet Ratings team rates CHESAPEAKE ENERGY CORP as a Sell with a ratings score of D. TheStreet Ratings Team has this to say about their recommendation:
"We rate CHESAPEAKE ENERGY CORP (CHK) 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 deteriorating net income, disappointing return on equity, weak operating cash flow, generally disappointing historical performance in the stock itself and feeble growth in its earnings per share."
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 Oil, Gas & Consumable Fuels industry. The net income has significantly decreased by 979.8% when compared to the same quarter one year ago, falling from $425.00 million to -$3,739.00 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 Oil, Gas & Consumable Fuels industry and the overall market, CHESAPEAKE ENERGY CORP's return on equity significantly trails that of both the industry average and the S&P 500.
- Net operating cash flow has significantly decreased to $423.00 million or 67.23% 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.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 45.41%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 1159.25% 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.
- CHESAPEAKE ENERGY CORP 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. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, CHESAPEAKE ENERGY CORP increased its bottom line by earning $1.83 versus $0.68 in the prior year. For the next year, the market is expecting a contraction of 111.5% in earnings (-$0.21 versus $1.83).
- You can view the full analysis from the report here: CHK Ratings Report