Wells Fargo Initiates Coverage On Apergy Citing Strong Growth Prospects

Apergy Corp APY is leveraged to the long-term development of U.S. shale. The company also has prospects of international growth, a strong management team and an “industrial DNA”, which drives commitment towards technology investment, operational efficiency, free-cash flow and returns, according to Wells Fargo.

The Analyst

Wells Fargo’s Judson Bailey initiated coverage of Apergy with an Outperform rating and $52 price target.

The Thesis

The oil & gas technology company’s core business segments, namely artificial lift and polycrystalline diamond cutters (PDCs), position it for leveraging the long-term development of U.S. shale, Bailey said in a research report.

Having spun out of Dover Corp DOV, Apergy doesn't have a traditional offshore approach of asset building. Instead, the company invests in technology, with a focus on returns and cash flows.

Although rod lift conversion may be a headwind in 2019-2020, the company’s artificial lift segment may continue to outpace market trends, especially in the U.S., Bailey mentioned.

Meanwhile, Apergy’s DT segment enjoys a 50-percent market share among PDCs and has exposure to growth in global rig count. The segment could continue to outperform U.S. and global rig count trends, with new product offerings like diamond bearings, the analyst further stated.

Price Action

Shares of Apergy traded around $41.67 Monday afternoon.

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