New Drilling Contracts At Rowan (RDC) Indicate Worst Is Behind
Analysts at MKM Partners downgrade Rowan Companies (NYSE: RDC) to "neutral." The fair value for RDC is set to $30.
RDC’s shares have appreciated by 21% since January 27, 2010, as compared to a 2% rise in the S&P 500. “
Rowan has reported several new drilling contracts that support our view that the worst is behind the premium jackup market, even though the pace of recovery is still highly speculative,” the analysts say. “These new drilling contracts, along with guidance for higher-than-expected 2010 profits from Rowan’s manufacturing division and a slightly lower tax rate, have driven our 2010 earnings estimates to $2.55 per share from $2.32 per share.”
Rowan Companies used to trade at a substantial discount to some deepwater companies, such as Transocean (NYSE: RIG) and Pride International (NYSE: PDE). MKM Partners mentions that since “the new contract announcements have helped eliminate the stock’s valuation advantage, we recommend other offshore drilling investments to focus on deepwater companies.”
