Schaeffer's Trading Floor Blog

Analyst Downgrades: Transocean LTD, Weatherford International, and AmerisourceBergen

Analysts downwardly revised their ratings on RIG, WFT, and ABC

by 3/5/2013 9:25 AM
Stocks quoted in this article:

Analysts are weighing in today on offshore drilling company Transocean LTD (NYSE:RIG- 52.19), drilling equipment maker Weatherford International Ltd. (NYSE:WFT - 11.32), and pharmaceutical services concern AmerisourceBergen Corp. (NYSE:ABC - 48.25). Here's a quick roundup of today's bearish brokerage notes.

  • After a massive jump up the charts earlier this year, RIG has given back about half those gains over the last three weeks. And today, the offshore drilling company saw its price target cut to $58 from $61 by Susquehanna; the firm reiterated its "neutral" rating. This comes after another analyst cut the price target on Monday amid news that investor Carl Icahn -- who owns 5.6% of RIG's outstanding shares -- is pushing RIG's board to issue a bigger dividend, while proposing new board members himself. As stated, the stock had a huge lift during the first six weeks of 2013, climbing to $59.50 on Valentine's Day to set a new annual high. But since then, shares have drifted down near the $50-52 level. Sentiment on the option trading floor toward RIG appears to be mixed, however. The stock's Schaeffer's put/call open interest ratio (SOIR) is 0.56 on options that expire in the next three months. That stands just 3 percentage points above an annual low, indicating put trading is as unpopular as ever. But the equity's 10-day call/put volume ratio on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) reads 2.14 -- a relatively high number until it's considered that the reading is lower than 63% of other data points in the last year. That means that short-term option buyers are trending away from bullish RIG calls.

  • WFT was also hit with a target price cut -- with J.P. Morgan Securities lowering its expectation to $15 from $16 (it kept its "overweight" rating). Technically, WFT has been treading water so far this year after taking a huge earnings-related hit in November when it dropped to its annual low of $8.84. RIG moved as high as $13.70 on Jan. 30, but has since dropped back down to its current level of $11.32. Meanwhile, option traders are increasingly bearish on the stock. WFT's 10-day put/call volume ratio on the ISE/CBOE/PHLX is 0.25. That may be a relatively low number, but it still ranks higher than 82% of other readings taken in the last 12 months, meaning traders are increasingly turning toward bearish puts lately.

  • Conversely, ABC has been a technical standout, climbing 11.7% so far this year and hitting its annual high of $48.25 on Monday. But that didn't stop ISI Group from cutting the stock to "buy" from "strong buy" ahead of the open. But even with the downgrade, seven of the 10 analysts covering the company still have "buy" or better ratings on RIG, and the other three have "holds." Option traders are equally bullish. On the ISE/CBOE/PHLX, ABC's 10-day call/put volume ratio is at 7.63, meaning traders are buying to open nearly eight times as many calls than puts. That ranks in the top 8% of similar data from the last 12 months, meaning traders have rarely been so call-centric as they are now.

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