The oil services companies still have mojo.
Oil States International, Inc.
(
OIS
) had a record first quarter as drilling demand remained hot. Yet
skittish investors have sold off shares, making this company a true
value stock with a forward P/E of just 8.7.
Oil States has two major divisions: Offshore Products and Well Site
Services. Offshore Products manufactures deepwater capital
equipment which is used on floating production platforms, subsea
pipelines and floating drilling rigs.
Well Site Services provides land drilling with its fit-for-purpose
drilling rigs in West Texas and the Rocky Mountain region.
The company rents tools to producers to be used in completion and
production of a well. Oil States' rental tool division is focused
on the Rockies, Barnett Shale, the Mid Continent and in the
Fayetteville Shale oil producing regions and is growing in the
popular Marcellus, Haynesville and Bakken shale regions.
Oil States Beat Big Again In Q1
On Apr 26, Oil States reported its first quarter results and blew
by the Zacks Consensus Estimate by 23%. It kept intact the
company's amazing earnings surprise streak which stretches back
nearly 5 years with only one miss.
It has been beating big the last 4 quarters as the average beat was
12.6% during that time.
Earnings were a record $2.20 per share, 48% higher than the $1.13
the company made in the first quarter a year ago.
Sales rose 45% to $1.1 billion from $760.4 million a year ago due
to organic growth initiatives, increased deepwater spending and
higher U.S. drilling and completion activity. Sales in the
Accommodations segment climbed 44% to $301.8 million. The Well Site
Services segment also saw double digit sales gains of 30% to $183
million.
A lot of players in the natural gas industry were hit by the
downturn in natural gas prices but Oil States was able to weather
the shift in drilling activity from the dry gas regions to the
liquids basins because it had 55 locations across the U.S. which
allowed it to manage the change.
Customer demand for tubulars also remained strong with a 33% year
over year increase in shipments due mainly to higher U.S. drilling
activity along with increased shipments of OCTG destined for
offshore wells.
2012 Zacks Consensus Estimate Keeps Rising
Analysts are still bullish about 2012. In the last 60 days, the
full year Zacks Consensus Estimates has risen 8% to $8.01.
That is 36% earnings growth compared to last year where the company
only made $5.88.
The expected earnings growth in both 2012 and 2013 is heading in
the right direction as you can see on the far right of this chart.
Plenty Of Value
Shares have taken a dive since May, although it's not as severe as
the one that happened in the summer of 2011.
But it is enough to make Oil States an even bigger value.
Along with a P/E under 10, Oil States also has a price-to-book
ratio of 1.7. A P/B ratio under 3.0 can mean a company has value.
Additionally, Oil States has a price-to-sales ratio of 0.9. That
scoots in right below the 1.0 level, which is the level that
usually indicates a company is undervalued.
The company also has other solid fundamentals like a 1-year return
on equity (ROE) of 19.8%. The S&P 500, in comparison, has an
average ROE of just 13.1%.
It's not too late to get in on the domestic drilling boom. Oil
States is an attractive value stock with the added bonus of strong
growth.
Tracey Ryniec is the Value Stock Strategist for
Zacks.com
. She is also the Editor of the Turnaround Trader and Insider
Trader services. You can follow her on twitter at
@TraceyRyniec
.
OIL STATES INTL (OIS): Free Stock Analysis
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