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Ecopetrol’s (EC) Ratings Upgraded by Fitch, Outlook Stable

Zacks

Ecopetrol S.A. EC announced the upgrade of its credit profile by Fitch Ratings. The leading credit rating agency has rated its stand-alone credit profile as BBB against the prior BBB-.

Fitch Ratings added that the recent rating reflects the integrated energy firm’s stable outlook with investment grade rating. The rating agency specifically mentioned that over the past two years, the firm’s gross Debt/EBITDA indicator has strengthened drastically, reflecting an improving credit profile. Notably, the indicator basically shows the financial strength of Ecopetrol to pay off its outstanding debt. The rating agency estimated the energy player’s gross Debt/EBITDA ratio at 1.3x

In other words, the upgrade of credit rating reflects significant improvement in financial strength of Ecopetrol aided by an impressive policy for debt management. Most importantly, the company’s long-term debt of $9.6 billion — as of Sep 30, 2018 — plummeted by more than 83% through the first nine months of 2018.

Investors should know that the company’s balance sheet is less levered than the industry as reflected by the stock’s debt-to-capitalization ratio of 41.9%, which is lower than the industry’s 51.2%.


Along with improvement in credit profile, the company’s cashflow generation ability is also strengthened. Over the trailing 12 months — as of Sep 30, 2018 — the company’s free cashflow was $18.3 billion, of which $1.3 billion has been distributed as dividends. The dividend amount is significantly higher than only $320 million allotted through 2017.

In Colombia, Ecopetrol is the largest energy firm with an integrated business model. Presently, the stock carries a Zacks Rank #3 (Hold). Meanwhile, a few better-ranked players in the energy space are TC PipeLines, LP TCP, Eni SpA E and Unit Corporation UNT. All the stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

TC PipeLines beat the Zacks Consensus Estimate in three of the last four quarters, the average positive earnings surprise being 15.6%.

Eni managed to beat the Zacks Consensus Estimate in three of the past four quarters.

Unit Corporation surpassed the Zacks Consensus Estimate in three of the last four quarters, the average positive earnings surprise being 21.3%.

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