Let's call it a busted straight. The companies listed below trade in the low single digits and may look like bargains to the untrained eye. Some even have had double-digits rallies on days when the broader market languished. However, investors should not be fooled. These companies still have earned their spots on Real Money's "Stressed Out" index.
Buying these companies now is placing a bet on their ability to fulfill their financial obligations, not their growth. Furthermore, if things truly turn south for some of these companies, shareholders will find they are at the bottom of the totem pole when it comes to recouping their investment.
Advanced Micro Devices (AMD): Shares of this Sunnyvale, California-based semiconductor company now trade for less than $2, as the stock price has plunged 41% over the last year. In some ways, the company is a dinosaur in glittering Silicon Valley. When the company reported earnings last month, it acknowledged that consumer preference for smaller devices was eating away at its revenue, which is typically derived from desktop PCs and notebook computers. As of the fourth quarter, the company has $2.3 billion in debt, which is rated CCC by Standard & Poor's. It has a $600 million note coming due in 2019, which currently is quoted at 66 cents on the dollar, according to data from Thomson Reuters. As the company continues to find the PC market drying up, its ability to cover future obligations could be compromised.
Sprint (S): Shares of the Overland Park, Kansas-based wireless services provided are down 47% over the last year and currently trade around $2.72. About 35% of Sprint's shares are held short as the company contends with its hefty debt level amid its reputation as a "poor" carrier, according to analysts at J.P. Morgan Securities. In December, CFO Tarek Robbiati said the company's priorities are "cost cuts, cost cuts, and, again, cost cuts." Even as it aims to cut costs, its debt looms. Real Money reported that two tranches of the company's bonds were among the most actively traded on Monday and fell more than 3% to just under 61 cents on the dollar, according to bond tracking service Trace, a division of the Financial Industry Regulatory Authority.
Tidewater (TDW): Shares of this Louisiana-based oilfield services company are down 83.5% over the last year and currently trade around $4.70. Not only is Tidewater hurt by low oil and gas prices, but it also faces country risk from its dealings in Brazil and Venezuela -- two countries, that rank low on the World Bank's annual "Doing Business" list. Late last month, the company announced it was suspending its quarterly dividend and previously announced plans to repurchase its common stock. Suspension of the dividend will save Tidewater $47 million annually and the company had planned to purchase $100 million in stock. In a statement announcing the decision, Tidewater said the moves were "part of a broader plan of reducing costs and capital expenditures in order to preserve liquidity in an oilfield services market that has been negatively impacted by the precipitous drop in oil prices and corresponding reduction in global E&P spending."
Freeport-McMoRan (FCX): Shares of Phoenix-based Freeport are down 76% over the last year and currently trade just under $5. The natural resources company announced that it wants to relieve itself of $5 billion to $10 billion of its $20 billion debt load as it has been plagued by low commodity prices in all of its businesses. The process to do so, however, will take time and multiple transactions, the company said when it released its fourth-quarter earnings last month. After reporting losses of $11.31 a share for 2015, the company announced that it was reducing its capital spending to $3.4 billion, which would be down from $6.35 billion in 2015.
United States Steel (X): Shares of Pittsburgh-based U.S. Steel are down 74% over the last year and currently trade just below $7. Short interest accounts for 38% of its float as the company contends with what it called in its fourth-quarter earnings release "the worst market and business conditions we have seen." For 2015, U.S. Steel reported a net loss of $1.5 billion, or $10.32 a share. The company's next debt obligation is a $450 million note due in 2017. It is rated B by Standard & Poor's and trades just below 80 cents on the dollar and yields 25%, according to data provided by Thomson Reuters. As noted in U.S. Steel's most recent earnings release, it has $755 million in cash and $2.4 billion of total liquidity, but the company is very aware of the issues weighing on its finances.
"We're still in great cash position, paying off $300 million worth of debt, and we've still got $2.4 billion worth of liquidity," CFO David Burritt said on the company's January earnings call. "So we feel extraordinarily comfortable where we are today. But living in this paranoid world of steel, we certainly have to adapt what's ever there. We're not going to tell you what the next steps are, but you can understand that we're on it and we got it."
Real Money's James Passeri and Tony Owusu contributed to the reporting of this piece.
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