Bull of the Day: Unit (UNT) - Bull of the Day

Unit is a Tulsa-based energy company that operates in three segments: exploration and production, contract drilling and gas gathering and processing.

Production Expected to Jump in 2014

With exploration companies, it's all about how much of the product it can get out of the ground. In 2013, production rose 18% year over year. In oil and natural gas, it was at the upper end of its guidance range.

On Feb 25, Unit was bullish about 2014's production as well. Despite weather delays impacting the first quarter, it still guided 2014 production growth of between 15% and 18%.

Contract drilling was soft in 2013, but Unit managed to maintain consistent utilization. In the fourth quarter, it averaged 65 rigs in operation and saw improvement in the first quarter of 2014 with 69 rigs in operation.

Rising propane and natural gas prices in the first quarter of 2014 should also help the midstream segment in 2014.

Total revenue in 2013 rose to $1.35 billion with 48% oil and natural gas, 31% contract drilling and 21% mid-stream compared to $1.32 billion in 2012 with the mix of 43% oil and natural gas, 40% contract drilling and 17% mid-stream.

2014 Earnings Estimates Jump

The analysts like what they heard in February and have been raising estimates ever since.

5 estimates have been adjusted higher in the last 60 days, including 1 in the last week, pushing the Zacks Consensus Estimate up to $4.39 from $3.91 in that time.

Earnings are expected to jump 12.8% in 2014.

The analysts are also bullish about 2015 as well with another 10.6% earnings growth expected.

Shares at 2-Year High

The Street didn't care much about energy companies in 2013 but in 2014, energy is suddenly back on everyone's radar.

Shares have jumped to 2-year highs but valuations remain attractive.

Unit has a forward P/E of just 15 which is under the average of the S&P 500 of 15.9.

It also has a price-to-book ratio of only 1.5. A P/B ratio under 3.0 usually indicates a company is undervalued.

Unit is expected to report first quarter results in early May.

For investors looking for a way to play the energy sector, and also want growth and value, Unit is one that should be on the short list.

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Tracey Ryniec is the Value Stock Strategist for Zacks.com. She is also the Editor of the Insider Trader and Value Investor services. You can follow her on twitter at @TraceyRyniec.

 
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