Southwestern Energy (SWN) Stock Gains on Rising Oil Prices, Analyst Upgrade

NEW YORK (TheStreet) -- Southwestern Energy (SWN) shares are up 2.32% to $23.55 in trading on Tuesday as oil prices lifted the sector and analysts at Tudor Pickering upgraded the natural oil and gas exploration company to "accumulate" from "hold" today.

Oil prices are gaining today as demand increases as refineries convert oil to gasoline at near record rates, according to the Wall Street Journal.

Additionally, Tropical Storm Bill, which is forming off of the Texas coast, could disrupt offshore drilling operations in the Gulf of Mexico, helping bring down supply of crude in an over saturated market.

Light sweet crude for July delivery is up 57 cents to $60.29 per barrel on the New York Mercantile Exchange today.

TheStreet Ratings team rates SOUTHWESTERN ENERGY CO as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:

"We rate SOUTHWESTERN ENERGY CO (SWN) 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 reasonable valuation levels, largely solid financial position with reasonable debt levels by most measures and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, disappointing return on equiaty and weak operating cash flow."

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

  • The debt-to-equity ratio is somewhat low, currently at 0.73, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Despite the fact that SWN's debt-to-equity ratio is low, the quick ratio, which is currently 0.54, displays a potential problem in covering short-term cash needs.
  • 49.09% is the gross profit margin for SOUTHWESTERN ENERGY CO which we consider to be strong. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, SWN's net profit margin of 8.36% compares favorably to the industry average.
  • Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. In comparison to the other companies in the Oil, Gas & Consumable Fuels industry and the overall market, SOUTHWESTERN ENERGY CO's return on equity is significantly below that of the industry average and is below that of the S&P 500.
  • 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 Oil, Gas & Consumable Fuels industry. The net income has significantly decreased by 59.8% when compared to the same quarter one year ago, falling from $194.19 million to $78.00 million.
  • You can view the full analysis from the report here: SWN Ratings Report

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