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Talisman Downgraded to Strong Sell

COG TLM

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Zacks Investment Research downgraded Talisman Energy Inc. (TLM - Analyst Report) to a Zacks Rank #5 (Strong Sell) on Jan 9.

Why the Downgrade?

Talisman Energy witnessed sharp downward estimate revisions after reporting disappointing third-quarter 2012 results. In fact, this Canadian energy explorer delivered negative earnings surprises in the last 4 quarters with an average miss of 82.39%. The long-term expected sales growth rate for this stock is negative 1.95%.

On October 30, 2012, Talisman Energy reported third-quarter 2012 loss per share of 9 cents against the Zacks Consensus Estimate of earnings of 6 cents and the year-ago earnings of 24 cents per share.

The loss was mainly due to lower price realizations. Talisman’s realized commodity prices dropped 12.50% from the year-ago quarter to $57.19 per barrel of oil equivalent (BOE) mainly on account of sharply lower North American realizations. Overall, natural gas prices declined 19.2% year over year to $4.89 per Mcf, while oil and liquids realizations averaged $101.89 per barrel, down 6.3% from the year-ago level.

Also, cash flow from continuing operations during the quarter totaled $693.0 million, down 23.2% from the third quarter of 2011.

For 2012, most of the estimates (9 out of 12) were revised downward over the last 60 days, lowering the Zacks Consensus Estimate by 5.4% to 35 cents per share.

Other Stocks to Consider

Not all energy stocks are performing as poorly as Talisman Energy.  The stocks of Lone Pine Resources Inc. and Cabot Oil & Gas Corporation (COG - Analyst Report) are worth considering. Both carry a Zacks Rank #1 (Strong Buy).
 

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