Analysts Leo P. Mariani and Kyle Rhodes said they like Rice Energy for its "solid operational execution, its ultra-low cost asset base, and a visible pact to improving its balance sheet during 2016."
The analysts believe the company's risk/reward is favorable in light of their expectations for improving gas prices this winter and upcoming catalysts.
"RICE is more hedged than most of its gassy peers (~55% of 2016E volumes) but has not been immune to recent weakness in front-month gas benchmark contracts," the RBC analysts wrote. "We believe a seasonal rally in gas prices could provide a tailwind for gassy E&Ps this winter. We also believe that RICE has baked in a healthy amount of conservatism into its FY15 production guidance, setting the table for a beat and raise story with 3Q15 earnings."
Separately, TheStreet Ratings team rates RICE ENERGY INC as a Sell with a ratings score of D. TheStreet Ratings Team has this to say about their recommendation:
We rate RICE ENERGY INC (RICE) 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 generally disappointing historical performance in the stock itself, deteriorating net income and feeble growth in its earnings per share.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 25.24%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 750.00% compared to the year-earlier quarter. Although its share price is down sharply from a year ago, do not assume that it can now be tagged as cheap and attractive. The reality is that, based on its current price in relation to its earnings, RICE is still more expensive than most of the other companies in its industry.
- 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 780.3% when compared to the same quarter one year ago, falling from -$7.92 million to -$69.68 million.
- RICE ENERGY INC 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, RICE ENERGY INC turned its bottom line around by earning $1.67 versus -$0.12 in the prior year. For the next year, the market is expecting a contraction of 94.9% in earnings ($0.09 versus $1.67).
- RICE's debt-to-equity ratio of 0.95 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. Regardless of the somewhat mixed results with the debt-to-equity ratio, the company's quick ratio of 1.19 is sturdy.
- 47.08% is the gross profit margin for RICE ENERGY INC 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, RICE's net profit margin of -61.72% significantly underperformed when compared to the industry average.
- You can view the full analysis from the report here: RICE