Why Chesapeake Energy (CHK) Stock Is Up Today

Tickers in this article: APC CHK MCO

NEW YORK (TheStreet) -- Chesapeake Energy Corp.  closed up 1.9% to $26.13 in trading Tuesday.

The bump comes following a Moody's  report that states that gas producers in the Marcellus shale region will benefit more than gas producers elsewhere in North America.

"Technological advancements since the early 2000s have allowed U.S. natural gas producers to reshape the industry largely through the development of the Marcellus," said Associate Analyst Michael Sabella, the author of the study.

"The Marcellus has emerged as one of the most profitable regions in the U.S. for producing natural gas, so even if prices return to the weak levels of 2012, producers there will be rewarded,"he added.

Must Read: 
Warren Buffett's 10 Favorite Stocks 

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

The Marceullus natural gas trend encompasses 104,000 square miles across West Virginia and Pennsylvania. Moody's lists the proximity of the natural gas to East Coast hubs as one of the advantages of exploration in the region.

TheStreet Ratings team rates CHESAPEAKE ENERGY CORP as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:

"We rate CHESAPEAKE ENERGY CORP (CHK) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its robust revenue growth, good cash flow from operations and solid stock price performance. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, poor profit margins and generally higher debt management risk."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth greatly exceeded the industry average of 7.9%. Since the same quarter one year prior, revenues rose by 28.3%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • Net operating cash flow has increased to $1,053.00 million or 20.61% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -23.15%.
  • CHESAPEAKE ENERGY CORP has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, CHESAPEAKE ENERGY CORP turned its bottom line around by earning $0.68 versus -$1.62 in the prior year. This year, the market expects an improvement in earnings ($1.82 versus $0.68).
  • 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 138.7% when compared to the same quarter one year ago, falling from $300.00 million to -$116.00 million.
  • The gross profit margin for CHESAPEAKE ENERGY CORP is currently lower than what is desirable, coming in at 29.29%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -2.55% trails that of the industry average.
  • You can view the full analysis from the report here: CHK Ratings Report
STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.