Key Energy Services (KEG) Stock Falls on Lower Oil Prices

NEW YORK (TheStreet) -- Shares of Key Energy Services (KEG) were falling 6.5% to $1.88 Monday as oil prices continue to fall.

WTI crude oil for July delivery was down 1% to $59.36 a barrel Monday morning, and Brent crude oil for July delivery was down 1.9% to $62.65 a barrel.

Oil prices were falling Monday as the dollar gained strength due to the debt crisis in Greece and concerns over global oversupply, according to the Wall Street Journal. Analysts said that Saudi Arabia and Libya could soon raise their oil output while Iraq is producing at near-record levels, according to the Journal.

Talks with Iran could lead to the country outputting more oil to contribute more to the global oversupply. Analysts told the Journal global oil supplies increase at a rate of about 2 million barrels a day.

Key Energy Services is an oilfield services company based in Houston.

TheStreet Ratings team rates KEY ENERGY SERVICES INC as a Sell with a ratings score of D. TheStreet Ratings Team has this to say about their recommendation:

"We rate KEY ENERGY SERVICES INC (KEG) 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 disappointing historical performance in the stock itself."

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 401.5% when compared to the same quarter one year ago, falling from -$11.90 million to -$59.68 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, KEY ENERGY SERVICES INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for KEY ENERGY SERVICES INC is rather low; currently it is at 23.63%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -22.28% is significantly below that of the industry average.
  • Net operating cash flow has significantly decreased to -$2.66 million or 105.83% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much 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 75.07%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 387.50% 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.
  • You can view the full analysis from the report here: KEG Ratings Report

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