Ensco (ESV) Stock Declines on Negative Fleet Update

NEW YORK (TheStreet) -- Ensco (ESV) shares are down 5.33% to $22.19 in afternoon trading on Thursday despite rising oil prices due to the company's fleet status update that was released today.

The company said that it had agreed to reduce the rate it charged energy operator Total S.A. (TOT) for one ultra-deepwater drillship while also agreeing to reduce the length of the contract on a second ship by six months, according to Barron's.

"The offshore drilling market continues to be characterized by very few new contracts, falling dayrates and contract renegotiations. We are not expecting a bottom in the overall offshore rig count until Mid 2016 at the very earliest and expect rates and utilization to remain challenged in the interim," wrote RBC's Robert Pinkard, Barron's said.

TheStreet Ratings team rates ENSCO PLC as a Sell with a ratings score of D. TheStreet Ratings Team has this to say about their recommendation:

"We rate ENSCO PLC (ESV) a SELL. This is driven by a few notable weaknesses, 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 disappointing return on equity and generally disappointing historical performance in the stock itself."

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

  • 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, ENSCO PLC's return on equity significantly trails that of both the industry average and the S&P 500.
  • ESV's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 54.07%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last 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.
  • ENSCO PLC has improved earnings per share by 9.5% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, ENSCO PLC swung to a loss, reporting -$11.70 versus $6.08 in the prior year. This year, the market expects an improvement in earnings ($4.03 versus -$11.70).
  • ESV's debt-to-equity ratio of 0.72 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 ESV's debt-to-equity ratio is mixed in its results, the company's quick ratio of 2.14 is high and demonstrates strong liquidity.
  • Net operating cash flow has increased to $459.00 million or 10.17% when compared to the same quarter last year. Despite an increase in cash flow, ENSCO PLC's average is still marginally south of the industry average growth rate of 12.41%.
  • You can view the full analysis from the report here: ESV Ratings Report

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