Zacks Investment Research downgraded shares of Ultra Petroleum Corp. (UPL) from OUTPERFORM to NEUTRAL on September 01, 2014, with a target price of $28.00.
We are downgrading Ultra Petroleum shares to Neutral from Outperform the primary factors being lower-than-expected second quarter earnings and the latest debt-financed acquisition. Though we like the company's portfolio repositioning initiatives – toward liquids-rich plays and away from dry natural gas development , its low cost structure and the recent addition of high-return oil-rich acreage in Utah's Uinta basin, we believe these factors are adequately reflected in the present valuation. Our main concern lies with UPL's ever increasing balance sheet leverage and low hedge percentage. The company also lacks geographic diversification, which somewhat hampers its competitive positioning. As such, we see the stock performing in line with the broader market.
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