We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Hess (HES) Downgraded to Sell on Escalating Debt & Weak Oil
Read MoreHide Full Article
On Jun 21, upstream energy player Hess Corporation (HES - Free Report) was downgraded to a Zacks Rank #4 (Sell).
Key Factors
Since the beginning of 2014, the debt load has been rising at an exponential rate for Hess with no sign of reduction. Moreover, during Feb 2016, both Standard and Poor’s Ratings Services (S&P) & Moody’s Investors Service (Moody’s) slashed the company’s debt rating below investment grade. It is a matter of serious concern as the company is not being able to raise debt capital in favorable terms for financing growth projects.
On top of that, it has become increasingly difficult for the energy explorer to fund growth projects out of its own operations as it reported loss in 2016 and expects further losses this year.
Also, the business scenario has not been favorable for the company, thanks to persistently weak oil prices. Many analysts believe that if crude slips below $40 a barrel, many oil exploration and production players in the U.S. like Hess will be at a risk of halting production growth.
Moreover, Hess expects production levels in 2017 to fall below the prior year’s output. Hence, the combination of weak oil prices along with lower production will likely hurt Hess’s cashflows.
Over the last 60 days, the Zacks Consensus Estimate for the company’s second-quarter bottom line has been revised down to a loss of $1.02 per share from a loss of 95 cents. Also, for 2017, the Zacks Consensus Estimate has been cut to a loss of $3.69 from a loss of $3.43 over the same period.
These weaknesses got reflected in the company’s stock price movement over the last one year. During the period, Hess lost 32.5% as compared with the Zacks categorized Oil & Gas-U.S Exploration & Production industry’s 27.4% fall.
Stocks to Consider
Better-ranked players in the energy sector include Canadian Natural Resources Limited (CNQ - Free Report) , McDermott International Inc. and W&T Offshore Inc. (WTI - Free Report) . Canadian Natural and McDermott sport a Zacks Rank #1 (Strong Buy), while W&T Offshore carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
We expect year-over-year earnings growth for Canadian Natural of almost 725% for 2017.
McDermott beat the Zacks Consensus Estimate in each of the trailing four quarters, the average positive surprise being 387.50%.
W&T Offshore had an average positive earnings surprise of 69.21% for the last four quarters.
Looking for Ideas with Even Greater Upside?
Today's investment ideas are short-term, directly based on our proven 1 to 3 month indicator. In addition, I invite you to consider our long-term opportunities. These rare trades look to start fast with strong Zacks Ranks, but carry through with double and triple-digit profit potential. Starting now, you can look inside our home run, value, and stocks under $10 portfolios, plus more.
Image: Bigstock
Hess (HES) Downgraded to Sell on Escalating Debt & Weak Oil
On Jun 21, upstream energy player Hess Corporation (HES - Free Report) was downgraded to a Zacks Rank #4 (Sell).
Key Factors
Since the beginning of 2014, the debt load has been rising at an exponential rate for Hess with no sign of reduction. Moreover, during Feb 2016, both Standard and Poor’s Ratings Services (S&P) & Moody’s Investors Service (Moody’s) slashed the company’s debt rating below investment grade. It is a matter of serious concern as the company is not being able to raise debt capital in favorable terms for financing growth projects.
On top of that, it has become increasingly difficult for the energy explorer to fund growth projects out of its own operations as it reported loss in 2016 and expects further losses this year.
Also, the business scenario has not been favorable for the company, thanks to persistently weak oil prices. Many analysts believe that if crude slips below $40 a barrel, many oil exploration and production players in the U.S. like Hess will be at a risk of halting production growth.
Moreover, Hess expects production levels in 2017 to fall below the prior year’s output. Hence, the combination of weak oil prices along with lower production will likely hurt Hess’s cashflows.
Over the last 60 days, the Zacks Consensus Estimate for the company’s second-quarter bottom line has been revised down to a loss of $1.02 per share from a loss of 95 cents. Also, for 2017, the Zacks Consensus Estimate has been cut to a loss of $3.69 from a loss of $3.43 over the same period.
These weaknesses got reflected in the company’s stock price movement over the last one year. During the period, Hess lost 32.5% as compared with the Zacks categorized Oil & Gas-U.S Exploration & Production industry’s 27.4% fall.
Stocks to Consider
Better-ranked players in the energy sector include Canadian Natural Resources Limited (CNQ - Free Report) , McDermott International Inc. and W&T Offshore Inc. (WTI - Free Report) . Canadian Natural and McDermott sport a Zacks Rank #1 (Strong Buy), while W&T Offshore carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
We expect year-over-year earnings growth for Canadian Natural of almost 725% for 2017.
McDermott beat the Zacks Consensus Estimate in each of the trailing four quarters, the average positive surprise being 387.50%.
W&T Offshore had an average positive earnings surprise of 69.21% for the last four quarters.
Looking for Ideas with Even Greater Upside?
Today's investment ideas are short-term, directly based on our proven 1 to 3 month indicator. In addition, I invite you to consider our long-term opportunities. These rare trades look to start fast with strong Zacks Ranks, but carry through with double and triple-digit profit potential. Starting now, you can look inside our home run, value, and stocks under $10 portfolios, plus more.
Click here for a peek at this private information >>