Murphy Oil, Windstream Hit 52-Week Lows On Wall Street Downgrades

Jul 14, 2015

Two of Arkansas’ largest publicly traded concerns bounced off yearly lows in Monday’s week-opening session as U.S. stocks endured another day of Wall Street downgrades and uneasy trading following news that Europe had offered Greece a $96 billion bailout deal.

Overall, the Dow Jones Industrial Average rose 217.27, or 1.2%, to 17977.68. The S&P 500 added 22.98, or 1.1%, to 2099.60, while the technology friendly Nasdaq Composite Index advanced 73.82, or 1.5%, to 5071.51.

However, Murphy Oil Corp. and Windstream Holdings Inc. got off to a rough start for the week as Wall Street analysts downgraded both companies’ stock prices ahead of the opening bell. Morgan Stanley analyst Evan Calio downgraded his rating on Murphy Oil Corp. from Equal-Weight to Underweight, reducing the El Dorado-oil giant’s yearly price target from $50 to $48.

“We believe (Murphy) will lag the large cap E&P group whether the oil price recovery follows a V- or a U-shaped trajectory and expect its valuation discount to widen during initial stages of a recovery,” Calio wrote in a research note.

The downgrade pushed Murphy to a 52-week low of $39.62 in early trading, but the Arkansas oil company rebounded in the afternoon to end the day at $40.45, up 39 cents, on volume of 2 million shares.

Still with oil and gas prices remaining under pressure, Murphy is not expected to gain any momentum headed into its second quarter earnings call on July 29. A survey of Wall Street analysts expect Murphy to see quarterly losses of 57 cents per share on revenue of $688 million, according to Thomas Reuters. A year ago, the Arkansas oil and gas company reported profits of 90 cents per share on revenue of $1.35 billion.

Meanwhile, UBS downgraded Windstream from Neutral to Sell with a yearly price target of $5, down from the previous goal of $11.50. UBS analyst Batya Levi said he expects difficult trends to continue, and wondered if the Arkansas telecom’s dividend would continue.

“Windstream shares have been pressured by dividend-coverage concerns, its relationship with (Communications Sales & Leasing Inc.) CSAL and worsening fundamentals,” Levi said of Windstream’s first quarter spin-off of its telecom assets into a real estate investment trust.

“We expect the declining trend in revenues and EBITDA to continue to weigh on shares,” the Wall Street analyst forecasted. “We believe WIN’s remaining CSAL stake is key to covering the dividend and a lack of improvement in the underlying fundamentals could push the payout back to unsustainable levels. While this could be addressed with a lower capex level, we believe capital intensity needs to remain at mid-teens to drive better revenue trends.”

Windstream closed the day at $5.47, down 21 cents or 3.7%, dropping the company’s market value down to $551 million. Still, Windstream was able to recover from its 52-week low of $5.15 in the early morning trading session, but is well off its yearly high of $20.84 from nearly a year ago on July 29, 2014.

Overall, most Arkansas stocks advanced in Monday’s session. Dillard’s was the biggest gainer, rising $2.10 or 2.06% to $104.20. Still, Dillard’s shares have been pummeled in the second quarter, falling 27.7% since touching a 52-week high of $144.21 on April 13.

Besides Windstream, Little Rock’s Bear State Financial and Bentonville-based America’s Car-Mart Inc. were the other market losers in Monday’s trading session. In other market news, Bank of the Ozarks kicked-off the second quarter earnings period for Arkansas stocks by reporting earnings of 52 cents per share, up 53% from 34 cents a year ago.