Last update on 2024-06-05

Hess (HES) - Piotroski F-Score Analysis for Year 2023 (Final Score: 5/9)

Piotroski F-Score analysis of Hess (HES) for 2023 reveals a final score of 5/9, evaluating financial health with key metrics like profitability and liquidity.

Short Analysis - Piotroski Score: 5

We're running Hess (HES) against the Piotroski 9-criteria scoring system to assess profitability, liquidity, and operating efficiency:

Our analysis employs the Piotroski F-Score to evaluate Hess Corporation (HES) for investment purposes. The Piotroski F-Score is a scoring system from 0 to 9 that evaluates a company's strength based on nine criteria involving profitability, liquidity, and operating efficiency. Hess Corporation (HES) scored a 5 out of 9 in this analysis. The criteria taking into account include: 1) Profitability: Positive net income, positive cash flow from operations, and operating cash flow being higher than net income added points, while a decrease in ROA did not. 2) Liquidity: A decrease in leverage added a point, but a decline in the current ratio did not. 3) Operating Efficiency: The company earned a point for a slight reduction in share count, though its gross margin and asset turnover ratio both declined, earning no points.

Insights for Value Investors Seeking Stable Income

Based on the Piotroski F-Score and our detailed assessment across the nine criteria, Hess Corporation (HES) demonstrates some strengths, notably in profitability and reduced financial leverage. However, there are concerns about its growing asset inefficiency and decreasing gross margin. A score of 5 indicates mediocrity and may suggest the company is stable but not particularly strong in terms of financial health. Therefore, while HES shows positive signs, it could warrant caution. Potential investors might want to look for additional firms with higher Piotroski scores, indicating better financial health before making an investment decision. Further review of Hess's future strategies and industry settings would help gain more insights.

For those who are interested in delving deeper into the specifics, the subsequent section provides a comprehensive exploration of the criteria.

Profitability of Hess (HES)

Company has a positive net income?

Net income, or bottom-line profit, indicates a company's profitability after all expenses. Positive figures generally signify healthy financial performance.

As of 2023, Hess (HES) reported a net income of $1.382 billion, marking it as a positive figure. This positive trend is reassuring, especially when compared to the last two decades. Notably, there have been significant fluctuations, with net income experiencing highs such as $5.052 billion in 2012 and lows like -$6.132 billion in 2015. The dramatic dip in the mid-2010s may have reflected challenging market conditions but a return to positive net income signals resilience and recovery for Hess. Therefore, one point is added to the Piotroski Score for this criterion.

Company has a positive cash flow?

Evaluating the Cash Flow from Operations (CFO) criterion is essential to understand the underlying health of the company's core business activities.

The Cash Flow from Operations (CFO) for Hess (HES) in 2023 stands at $3,942,000. Notably, this value is positive, which is a strong indicator of stable core business operations. Over the last 20 years, the company has consistently reported positive CFO figures with a noticeable dip in 2016 ($795,000,000). The upward trend, especially from 2020 onwards (from $1,333,000,000 to $3,942,000,000), is a notable indication of improving operational performance and cash generation capabilities. Thus, according to Piotroski criteria, Hess would score an additional point for having a positive CFO in 2023.

Return on Assets (ROA) are growing?

Change in Return on Assets (ROA) is a critical indicator of a company's ability to generate profit from its assets. It measures the company's efficiency in utilizing its assets to produce net income. A higher ROA suggests effective management and potentially better financial health.

For Hess (HES), the ROA decreased from 0.0993 in 2022 to 0.0605 in 2023. This represents a decline in the company's efficiency in generating profits from its assets, therefore, 0 points should be added for this criterion. Comparing to the industry median ROA of 0.4978 in 2023, Hess' ROA significantly underperforms, indicating potential operational challenges. Historically, Hess' ROA fluctuated significantly, with better performance in the early 2010s. The drop in ROA suggests potential inefficiencies or challenges in asset utilization.

Operating Cashflow are higher than Netincome?

Operating Cash Flow (OCF) higher than Net Income assesses the quality of earnings. Higher OCF compared to Net Income indicates strong operational profitability and reduces the risk of earnings manipulation.

For the fiscal year 2023, Hess Corporation (HES) reported an Operating Cash Flow (OCF) of $3.942 billion compared to a Net Income of $1.382 billion. This implies that the company generated significantly more cash from its operations than its reported earnings. This trend is favorable as it suggests solid operational performance, efficient cash management, and less likelihood of earnings manipulation. Over the last two decades, the consistency in high operating cash flow relative to net income demonstrates robust profitability and financial health, with the OCF being higher than Net Income in most years. Hence, for this criterion, Hess Corporation earns 1 point.

Liquidity of Hess (HES)

Leverage is declining?

Change in leverage examines whether a company's financial leverage, typically measured by the debt-to-equity ratio, increases or decreases year over year, impacting financial stability.

The leverage ratio for Hess (HES) has decreased from 0.4114 in 2022 to 0.3714 in 2023, signaling a reduction in financial leverage. Over the past decade, a look at historical leverage values, such as highs of 0.4773 in 2020 and lows of 0.1268 in 2013, shows fluctuating debt-to-equity ratio which ended on a positive note in 2023. This decline is encouraging, suggesting enhanced financial health and reduced risk. Consequently, Hess earns 1 point for this criterion.

Current Ratio is growing?

The current ratio measures a company's ability to cover its short-term liabilities with short-term assets. A higher ratio is generally better, indicating stronger liquidity.

The current ratio for Hess (HES) dropped from 1.6407 in 2022 to 1.0489 in 2023. This represents a significant decrease, implying that the company may have a lower capacity to cover its short-term liabilities with its short-term assets in 2023 compared to the previous year. Over the last 20 years, Hess has had a fluctuating current ratio, peaking in 2017 at 2.5285. However, the current ratio in 2023 is still close to the industry median of 1.1065, which slightly dampens the negative perspective. Overall, due to the decrease, the Piotroski F-Score for this criterion would be set to 0.

Number of shares not diluted?

The criterion examines the change in the number of shares outstanding. A decrease indicates potential share buybacks, enhancing shareholder value, while an increase could dilute ownership stakes.

The outstanding shares for Hess (HES) have slightly decreased from 308,100,000 in 2022 to 307,158,272 in 2023. This reduction merits a 1 point addition, showing a proactive approach by Hess in buybacks or reducing share count. Over the last 20 years, the number of outstanding shares has seen fluctuations, peaking at 341,527,617 in 2011 and bottoming out at 271,026,000 in 2003, depicting strategic decisions to expand or contract equity.

Operating of Hess (HES)

Cross Margin is growing?

Change in gross margin is assessed by comparing the most recent gross margin percentage with the previous year's percentage. It reflects the company's efficiency in managing production costs and overall profitability.

Comparing 2023’s gross margin of 0.6158 to 2022’s 0.6989, we observe a decrease, not an increase. For Piotroski's criteria, this results in a score of 0 for this particular measure. Detailed analysis shows historical fluctuation in gross margin, yet HES remains above the industry median in recent years, with the latest figures reinforcing its competitive standing despite the year-over-year decline.

Asset Turnover Ratio is growing?

Asset turnover measures a company's efficiency in using its assets to generate sales or revenue; higher ratios indicate greater efficiency.

The asset turnover ratio for Hess decreased from 0.5366 in 2022 to 0.46 in 2023. This decline suggests reduced efficiency in using assets to generate revenue, translating to fewer sales per dollar of assets. Historical data shows fluctuations in asset turnover, including significantly higher values over a decade ago (1.5046 in 2008). The most recent decline means adding zero points in Piotroski analysis. With asset turnover not trending positively, Hess’s efficiency metrics might prompt investor concern.