Deutsche Bank Sees Hit To IHS From Lower Oil Prices

IHS Inc.'s IHS performance next year will be hurt as major customers in the oil sector cut back spending, an analyst said Friday.

Deutsche Bank's Paul Ginocchio downgraded the information publisher to Hold, from Buy, noting that 40 percent of its revenue is dependent on customers in the energy and natural resources sectors.

IHS traded recently at $122.25, down 1.44 percent.

The company derives about 75 percent of its revenue by selling subscriptions to specialized information services.

Along with energy and natural resources, it caters to industrial sectors including automotive, aerospace & defense, maritime, and technology.

Despite diversifying, "IHS' share price is still correlated to energy stocks," Ginocchio said, setting a $125 target.

Deutsche Bank expects capital spending next year by oil and gas companies will fall about 20 percent because of lower energy prices.

The spending decline "equals fewer projects and thus less demand for incremental info from IHS," Ginocchio said.

In the oil sector, Ginocchio noted that capital spending cuts for next year have already been announced by Denbury Resources Inc., Continental Resources Inc. and Apache Corp., with others expected to follow suit.

IHS is off about 13 percent in the past few months, but most of that decline stems from the company's cut to its August guidance, Ginocchio said.

The risk from lower oil prices "has only just begun to get priced in," Ginocchio said.