Market Overview

Two Oil Plays with a Focus on Deep-Water

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Major averages continue to hold gains bullishly and there's no shortage of stocks doing the same after impressive price runs.

The market isn't flashing anything in the way of sell signals, but investors that have been slow to put money to work so far are in a bit of pickle. With so many stocks out there extended past proper buying points, what's left out there to buy? It's a legitimate question because the crop of buy candidates has gotten a lot smaller.

Long opportunities may be few and far between at the moment, but two stocks in the oil and gas sector made nice moves Tuesday and are still within range.

Oceaneering (NYSE: OII) broke out of base in heavy volume, helped by an upgrade from Morgan Stanley to Overweight from Underweight. Oceaneering has a nice blend of strong fundamentals and technicals -- always good to see when evaluating a stock.

A bullish chart is one thing, but when there's a fundamental story fueling price performance, that's even better. The company provides engineered products and services to the offshore oil and gas industry. Its remotely operated vehicles (ROVs) help install valves in deep-water oil fields.

Fourth-quarter earnings are due aren't due until mid-February. Quarterly profit is seen rising 33% from a year ago to $0.74 a share with sales up 28% to $734.2 million. In 2012, full-year profit should be up 31% from 2011. In 2013, annual earnings are expected to rise 22 percent.

Meanwhile, equipment maker Cameron International (NYSE: CAM) also made a nice move, rising 2.9 percent to $59.10. The stock recently broke out over resistance at $57.78 in light volume but there was heightened interest in the stock Tuesday. Volume totaled 3 million shares, nicely above its average daily volume of 1.9 million shares.

Cameron's flow-equipment products are also used in deep-water environments. Earnings are due January 31 after the close. It's expected to earn $0.96 a share, up 25 percent from a year ago with sales up 17 percent to $2.38 billion.

Oil prices have been on the rise since early November despite persistent concerns about sluggish economic growth ahead. Most economists expect gross domestic product (GDP) growth of +0.6% to 1% in the fourth quarter. This year, it's hard to find an economist expecting growth better than 2%.

Whether or not oil prices head higher or lower from here shouldn't have much impact on earnings and sales growth going forward at Oceaneering and Cameron International. Both firms provide products and services that should see continued strong demand in coming quarters.

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