Analyst: Helmerich & Payne Has Run Out Of Upside

Helmerich & Payne, Inc. HP is doing everything right, but it’s still not good enough for one Wall Street analyst to stay bullish on the stock.

The Analyst

Bernstein analyst Colin Davies downgraded Helmerich & Payne from Outperform to Market Perform but raised his price target from $64 to $72.

The Thesis

Davies said Helmerich management is pulling all the right levers, but the stock’s 76 percent gain since the end of August has left very little room for additional upside in the near-term.

“With strong market share gain, a leading position in the Permian, the best ‘super-spec’ rig upgrade economics, improving rig rates and tax benefits all modeled in, we think the stock is now fairly valued and requires another structural leg up in oil price for more upside,” Davies said in a Monday note.

Additional upside in oil process may be hard to come by as well at this point. WTI crude oil prices are already up more than 18 percent in the past three months.

Davies said oil prices would need to approach $80 per barrel for him to get constructive on Helmerich stock again. Even at those price levels, he said additional upside would be only modest.

Davies said Wall Street analysts will likely need to raise earnings estimates given the company’s recent quarterly beat and the surprising strength in oil prices. However, he said target prices are unlikely to exceed the current share price of the stock by a considerable amount.

Price Action

Investors were undeterred by the downgrade on Monday. Helmerich stock traded higher by 0.5 percent to $74.54.

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