W&T Offshore, Inc. - Value

It's been awhile since I covered an energy exploration company as the recession and the Gulf of Mexico disaster hammered earnings for many of the smaller explorers.

W&T Offshore, which operates 75 fields predominantly in the Gulf of Mexico, was no exception. It lost $1.09 per share in 2009. But it has turned it around in 2010. Analysts expect earnings to jump to $1.34 per share, or earnings growth of 223%.

Acquisition of Interests in Shell's Gulf Fields

On Nov 4, the company announced it was acquiring from Shell the interests in 5 Gulf of Mexico deepwater producing fields known as Taho, SE Taho, Droshky, marlin and Dorado Fields and the possibility of an interest in a 6th field in the Gulf of Mexico shelf.

On Dec 7, however, the company announced that Shell elected to exercise its preferential rights to purchase 2 of the fields: Marlin and Dorado Fields. The original deal was worth $450 million, but without the two fields, it was reduced to $193 million. W&T Offshore is paying cash.

W&T Offshore Surprised 231% in the Third Quarter

On Nov 2, the company reported its third quarter results and blew by the Zacks Consensus by 30 cents. Earnings per share were 43 cents compared to the consensus of 13 cents. It lost 4 cents per share in the third quarter of 2009.

The quarter was boosted by higher oil production, higher average realized sales prices and lease operating expenses which declined 36% compared to a year ago.

Zacks Consensus Estimates Rise for 2010

Analysts revised estimates higher for 2010 over the last 30 days as the Zacks Consensus rose to $1.34 from $1.24 during that time.

They are more cautious about 2011, however.

2 estimates have moved higher and 2 lower for 2011 in the last month while the Zacks Consensus has held firm at $1.13 per share. This is an earnings decline of 15.3%.

Still a Value Stock

This Zacks #2 Rank (buy) stock still has solid valuations. In addition to its P/E ratio being under 15, the company has a price-to-book ratio of 2.8 which is within the value parameters.

The company also has a excellent 1-year return on equity (ROE) of 27.4% which is well above its peers at 18%.

Share recently jumped out to a 2-year high.

Update to Previous Value Zacks Rank Buy Stocks

Technology companies have seen a strong recovery in the last year and Itron Inc. (ITRI) is no exception. Earnings are expected to rise 88% compared to 2009 when the global recession was hitting software companies hard. With a low P/E, this growth gives Itron a juicy PEG ratio of just 0.7. Read the full article.

Demand is strong for IT hardware and software as companies finally have started investing in their businesses again. Insight Enterprises Inc. (NSIT) is taking advantage of the surge in demand, as sales jumped 21% in the third quarter. NSIT is not expensive, trading at just 8.8x forward estimates. Read the full article.

Domtar Corporation (UFS) has successfully navigated the paper market in 2010. Earnings are expected to grow an astounding 923% in 2010 after a difficult 2009. The company is cheap. It trades at just 7.5x forward estimates. Read the full article.

Specialty chemicals continue to pick up steam. Ferro Corporation (FOE) is expected to grow its earnings by 275% in 2010 which is a big turnaround after the company posted a loss in 2009. Read the full article.

Tracey Ryniec is the Value Stock Strategist for Zacks.com. She is also the Editor in charge of the market-beating Zacks Value Trader service. You can follow her at twitter.com/traceyryniec.

 
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