Spotlight on Oil Services Stocks (BHI, HAL, NOV, SLB)
We remain bullish on the oil-services, equipment and drilling companies and expect the group to significantly outpeform the broader equity market over the next several years.
The analyst has Overweight ratings on Baker Hughes (NYSE: BHI), Halliburton (NYSE: HAL), National Oilwell Varco (NYSE: NOV) and Schlumberger (NYSE: SLB), and lifted the price targets on Halliburton and Schlumberger.
This Houston-based oilfield services provider has a market capitalization of more than $18 billion and a dividend yield near 1.5 percent. The long-term earnings per share (EPS) growth forecast is about 14 percent, but the price-to-earnings (P/E) ratio is a little higher than the industry average. And the return on equity is only about 8.5 percent. The short interest was less than three percent of the float at the November 30 settlement date.
Less than half of the 31 analysts surveyed by Thomson/First Call who follow the stock recommend buying shares, but none recommend selling. Their mean price target, or where they expect the shares to go, is about 19 higher than the current share price. But that target is less than the 52-week high reached early in 2012.
The share price is almost 18 percent lower year to date, though still more than 10 percent higher than the 52-week low. The stock has underperformed larger competitors Halliburton and Schlumberger, and also the Dow Jones Industrial Average, over the past six months.
Also based in Houston, Halliburton sports a market cap of more than $32 billion and offers a dividend yield of about 1.1 percent. Its P/E ratio is lower than the industry average, and the long-term EPS growth forecast is more than 20 percent. The operating margin is higher than the industry average and the return on investment is about 21 percent. The short interest is a little more than two percent of the float, the lowest number of shares sold short since June.
All but six of the 33 analysts surveyed recommend buying shares; ten of them rate the stock at Strong Buy. They believe the stock still has plenty of room for growth, as their mean price target is more than 18 percent higher than the current share price. Shares have not traded at that level since September 2011.
Shares jumped almost four percent yesterday, despite a lowered price target from one analyst. But the share price is only about two percent higher year than at the beginning of the year. Over the past six months the stock has outperformed Baker Hughes and Schlumberger, as well as the broader markets.
National Oilwell Varco
This rig maker and oilfield services provider has a market cap of more than $29 billion and a dividend yield near 0.8 percent. The P/E ratio is less than the industry average. The long-term EPS growth forecast is more than 14 percent, and the return on equity is about 13 percent. The short interest is near one percent the float, the lowest level in a year.
All but two of the 30 polled analysts recommend buying shares; 11 of them rate it at Strong Buy. The mean price target represents more than 25 percent potential upside and a level shares have not seen since 2008.
The share price has declined more than 16 percent in the past 90 days and is now about three percent lower than at the beginning of the year. The stock has underperformed competitor Halliburton and the Dow Jones Industrial Average over the past six months.
The market cap of the world's largest oilfield services company is more than $94 billion, and the company offers a dividend yield near 1.6 percent. The P/E and PEG ratios are a greater than the industry average, but the long-term EPS growth forecast and the return on equity are each more than 16 percent. Shares sold short are about one percent of the float but have been increasing since the end of September.
Of the 34 analysts polled, 31 rate the stock at Buy or Strong Buy. The mean price target is about 20 percent higher than the current share price. The share price has not been above $82 since August of 2011.
The share price dropped about five percent earlier this week on an earnings warning from the company. Shares are trading less than two percent above where they started the year. Over the past six months, the stock has underperformed Halliburton, but its performance has been in line with the Dow Jones Industrial Average.
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