Why Transocean Ltd. Pulled Back Today

While Fools should generally take the opinion of Wall Street with a grain of salt, it's not a bad idea to take a closer look at particularly stock-shaking upgrades and downgrades -- just in case their reasoning behind the call makes sense.

What: Shares of Transocean Ltd. (NYSE: RIG  ) slipped nearly 2% today after RBC Capital downgraded the contract drilling giant to sector perform from outperform.

So what: Along with the downgrade, analyst Kurt Hallead lowered his price target to $54 (from $56), representing about 12% worth of upside to yesterday's close. While contrarians might be attracted to the stock's slump in recent months, Hallead believes that uncertainty surrounding dayrates and utilization should continue to limit Transocean's appreciation potential.

Now what: RBC expects Transocean to earn $5.19 per share in 2014, which is about 7% below the current Wall Street consensus. "We believe that it is too early to tell how far dayrates and utilization will slip in the current market environment," noted RBC. "We have recently reduced our dayrate estimates and built increased risk into our model for downtime between contracts." With the stock now off about 20% from its 52-week highs and currently boasting a 4.5% dividend yield, however, that short-term uncertainty might be providing patient Fools with a solid long-term income opportunity.

More reliable ways to build wealth
Dividend stocks can make you rich. It's as simple as that. While they don't garner the notoriety of high-flying growth stocks, they're also less likely to crash and burn. And over the long term, the compounding effect of the quarterly payouts, as well as their growth, adds up faster than most investors imagine. With this in mind, our analysts sat down to identify the absolute best of the best when it comes to rock-solid dividend stocks, drawing up a list in this free report of nine that fit the bill. To discover the identities of these companies before the rest of the market catches on, you can download this valuable free report by simply clicking here now.


Read/Post Comments (1) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On January 09, 2014, at 10:35 AM, DukeMontrose wrote:

    RIG - the fallen giant. Think of all the negatives:

    1. Oldest fleet among major peers;

    2. Self-proclaimed "difficulties" leasing units this year = please connect the dots between #1 + #2 above

    3. Federal fines totaling at least $1.4 billion = "of course" NOT included in EPS figures

    4. A super-smart minority holder who forced RIG to pay a cash dividend it can ill afford =

    please connect the dots between #3 + #4.

    The leasing "problems" especially dangerous as an idle ship is highly expensive to maintain = so expensive = the scrapyard becomes the cheaper alternative.

    5. How can you finance $600+ million a pop new units on order when you have to deal with #1, #2, #3 and #4 above?

    Sadly, RIG appears to be IMO between the rock + the hard place.

    Please dont fool around with this one, dear Fools (pun intended!).

Add your comment.

DocumentId: 2787875, ~/Articles/ArticleHandler.aspx, 4/17/2014 3:23:37 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement