Transocean Ltd (NYSE:RIG) : Dividend action and stock analysis

Transocean Ltd (NYSE:RIG) declared dividend of $0.60 per share on May 15. It is expected that the dividend will be payable in four quarterly installments set for June 2015, September 2015, December 2015, and March 2016.

Let’s have a look at the fundamental picture to have a more comprehensive stock insight.  It is interesting to look into the ratio of debt to equity ratio to check if the company is not too much reliant on the outside funding to finance its growth. Transocean Ltd (RIG) has a debt to equity ratio of 74% which is a reasonable figure and is below the Oil & Gas Drilling sector average of 61%. The company has a current ratio of 1.84. This ratio should be higher than one (ideally two) and is an indicator to show if the company is able to finance its short term obligations. Indeed it should have higher short term assets to dispose in order to cover for its short term liabilities.

For reference, it is important to look at these two ratios as important debt can lead to artificially high profitability ratios and company can get into trouble when a drop in sales occurs and/or higher financing costs when interest rate go upwards.

Note also that Transocean saw, in recent news, that floating rigs count to be on the low side for the foreseeable future. The company was indeed not preparing for an uptick in the market and is preparing instead for the potential for a “lower for longer” market environment and for “some pretty challenging times”.

However, RIG stock price outperformed peers recently. The company’s stock year-to-date performance is in positive territory, at 13.4% versus an industry average negative performance of -15.3%. RIG has a Market Cap of $7.31 billion.

RIG reported last quarter earnings on May 06. The Oil & Gas Drilling company announced earnings per share of $1.1 against a consensus Street estimate of $0.64, beating the average estimate by $0.46. This corresponds to a decrease of $0.08 compared to the same quarter of the previous fiscal year.

In its last full year 2015 guidance, Transocean anticipated that its FY15 operating and maintenance expenses will be between $3.8 billion and $4.1 billion, which it said represented a reduction versus its FY14 O&M costs and its initial expectations for this year.

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There are currently thirty-nine analysts that cover RIG stock. Of those thirty-nine, one has a Buy rating, fourteen have a Hold rating and twenty-four have a Sell rating. On a consensus basis this yields to an Underweight rating. The consensus target price stands at $12.87.

A recent analyst activity consisted of Morgan Stanley downgrading their Equalweight rating to Underweight on April 23. Morgan Stanley set their price target at $19.5. This corresponds to a 3.03% downside from the last closing price. On the date of report, the stock closed at $16.97.

Deutsche Bank reiterated their Sell stance on the same day, and decreased their price target from $6 to $3. This corresponds to a 85.08% downside from the last closing price. On the date of report, the stock closed at $16.97.

Transocean Ltd (NYSE:RIG) is an offshore drilling contractor. The Company owns or operates mobile offshore drilling units, inland drilling barges, and other assets utilized in the support of offshore drilling activities worldwide. Transocean specializes in technically demanding segments of the offshore drilling business, including deepwater and harsh environment drilling services.

Transocean Ltd (NYSE:RIG) : Dividend action and stock analysis was last modified: May 18th, 2015 by Seth Talluto