Ensco International shares drop after downgrade

Shares of Ensco International Inc., which operates a fleet of offshore drilling rigs, dropped Tuesday after an analyst downgraded the company, saying he sees few positive near-term catalysts.

The stock fell $4.98, or 7.4 percent, to $62.80.

JPMorgan analyst David Smith lowered his rating on the Dallas-based company to "Underweight" from "Neutral."

While the stock has outperformed its sector by 20 percent so far this year, headwinds from a global jackup market, a lack of positive catalysts and the "uninspiring use of free cash flow" indicate Ensco will likely underperform its peers over the next six to 12 months, Smith said.

"The growing risk to the international jackup contractors is the development of an excess of supply," Smith said in a note to clients. "If supply continues to grow in excess of demand, rigs will sit idle, and pricing competition will likely intensify until contractors voluntarily stack rigs."

So far this year, shares are up about 5 percent.

A company representative declined to comment.