NEW YORK (TheStreet) -- Transocean (RIG - Get Report) shares are declining by 0.75% to $13.28 on Wednesday afternoon, as oil prices tumble on the Federal Reserve's decision to increase interest rates for the first time since June 2006.
Officials raised rates by 25 basis points. The new target will be between 0.25% and 0.5%, from 0% to 0.25%, CNBC.com reports.
"The stance of monetary policy remains accommodative after this increase, thereby supporting further improvements in labor market conditions and a return to 2 percent inflation," the Federal Open Market Committee stated.
Following this announcement, oil prices continued a slide started earlier in the day as raising rates would strengthen the dollar, which makes oil more expensive for traders in foreign countries.
Crude oil (WTI) is sinking by 4.04% to $35.84 per barrel and Brent crude is falling by 3.46% to $37.12 per barrel, according to the CNBC.com index.
However, one upside is that congressional leaders on Tuesday agreed to lift the 40-year-old export ban on most U.S. crude exports, the Wall Street Journal added.
Recently, TheStreet Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this articles's author. TheStreet Ratings has this to say about the recommendation:
We rate TRANSOCEAN LTD as a Sell with a ratings score of D+. This is driven by multiple 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 weak operating cash flow and generally disappointing historical performance in the stock itself.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Net operating cash flow has decreased to $648.00 million or 26.53% when compared to the same quarter last year. In conjunction, when comparing current results to the industry average, TRANSOCEAN LTD has marginally lower results.
- RIG has underperformed the S&P 500 Index, declining 24.39% from its price level of one year ago. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Energy Equipment & Services industry and the overall market on the basis of return on equity, TRANSOCEAN LTD underperformed against that of the industry average and is significantly less than that of the S&P 500.
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 31.1%. Since the same quarter one year prior, revenues fell by 29.2%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- RIG's debt-to-equity ratio of 0.64 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 RIG's debt-to-equity ratio is mixed in its results, the company's quick ratio of 2.03 is high and demonstrates strong liquidity.
- You can view the full analysis from the report here: RIG