NEW YORK (TheStreet) -- Shares of CrossAmerica Partners (CAPL) were falling 8.1% to $30.32 on heavy trading volume Tuesday after the oil company priced the 4.6 million common units in its public offering.
CrossAmerica priced the 4.6 million common units in the public offering at $31.45 a common unit. The company granted the underwriters of the offering a 30-day option to buy up to 690,000 additional common units.
The company expects to receive net proceeds of about $138.6 million from the public offering, or about $159.4 million if the underwriters exercise their option in full. CrossAmerica plans to use the proceeds to reduce indebtedness outstanding under its credit facility, and then to reborrow under the credit facility to fund future acquisitions.
The offering is expected to close on June 19, 2015.
About 1.3 million shares of CrossAmerica were traded by 10:40 a.m. Tuesday, above the company's average trading volume of about 60,000 shares a day.
CrossAmerica Partners is engaged in the distribution of motor fuels, consisting of gasoline and diesel fuel, and to own and lease real estate used in the retail distribution of motor fuels.
TheStreet Ratings team rates CROSSAMERICA PARTNERS LP as a Sell with a ratings score of D+. TheStreet Ratings Team has this to say about their recommendation:
"We rate CROSSAMERICA PARTNERS LP (CAPL) 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, generally high debt management risk, disappointing return on equity, poor profit margins 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 307.7% when compared to the same quarter one year ago, falling from $1.43 million to -$2.97 million.
- The debt-to-equity ratio is very high at 2.29 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with this, the company manages to maintain a quick ratio of 0.50, which clearly demonstrates the inability to cover short-term cash needs.
- 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, CROSSAMERICA PARTNERS LP's return on equity significantly trails that of both the industry average and the S&P 500.
- The gross profit margin for CROSSAMERICA PARTNERS LP is currently extremely low, coming in at 7.22%. Regardless of CAPL's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of -0.61% trails the industry average.
- CROSSAMERICA PARTNERS LP 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. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, CROSSAMERICA PARTNERS LP swung to a loss, reporting -$0.22 versus $1.19 in the prior year. This year, the market expects an improvement in earnings ($0.21 versus -$0.22).
- You can view the full analysis from the report here: CAPL Ratings Report