NEW YORK (TheStreet) -- Shares of Magnum Hunter Resources (MHR - Get Report) were falling 5.3% to $1.15 Wednesday as weekly oil data caused oil prices to fall.
WTI oil for September delivery was down 1.14% to $50.28 a barrel late Wednesday morning, and Brent crude oil for September delivery was down 0.61% to $56.69 a barrel.
Oil prices fell after a U.S. Energy Information Administration report shows that U.S. commercial crude oil inventories grew by 2.5 million barrels to 463.9 million barrels in the week ending July 17. Analysts surveyed by The Wall Street Journal expected crude oil stockpiles to fall by 1.6 million barrels in the week.
Increased imports and high production rates contributed to the stockpile increase despite refining capacity increasing to 95.5% of capacity, the highest level since 2005, in the week. Higher refinery capacity typically leads to lower crude oil inventories as the refineries process the crude into gasoline and other fuels.
Magnum Hunter Resources is an oil and gas company with plays in the Marcellus Shale and Utica Shale in the Appalachian Basin.
The company is expected to report its second quarter financial results on August 6.
TheStreet Ratings team rates MAGNUM HUNTER RESOURCES CORP as a Sell with a ratings score of D. TheStreet Ratings Team has this to say about their recommendation:
"We rate MAGNUM HUNTER RESOURCES CORP (MHR) a SELL. This is driven by some concerns, 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 unimpressive growth in net income, generally high debt management risk, disappointing return on equity, generally disappointing historical performance in the stock itself and feeble growth in its earnings per share."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- 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 72.0% when compared to the same quarter one year ago, falling from -$61.59 million to -$105.92 million.
- The debt-to-equity ratio is very high at 2.22 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with this, the company manages to maintain a quick ratio of 0.20, which clearly demonstrates the inability to cover short-term cash needs.
- 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 Oil, Gas & Consumable Fuels industry and the overall market, MAGNUM HUNTER RESOURCES CORP's return on equity significantly trails that of both the industry average and the S&P 500.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 82.03%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 39.02% compared to the year-earlier 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.
- MAGNUM HUNTER RESOURCES CORP's earnings per share declined by 39.0% in the most recent quarter compared to 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, MAGNUM HUNTER RESOURCES CORP continued to lose money by earning -$1.29 versus -$1.69 in the prior year. For the next year, the market is expecting a contraction of 6.6% in earnings (-$1.38 versus -$1.29).
- You can view the full analysis from the report here: MHR Ratings Report