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Oceaneering Upgraded to Buy - Analyst Blog

By: Zacks.com
Posted: 5/30/2013 10:28:00 AM
Referenced Stocks: EXH;NR;OII

On May 29, Zacks Investment Research upgraded oilfield services company, Oceaneering International Inc. ( OII ) to a Zacks Rank #2 (Buy).

Why the Upgrade?

The operating environment and growth prospects seem bright for Oceaneering, as reflected by strong first-quarter 2013 results and an enhanced guidance for 2013. Moreover, Oceaneering delivered positive earnings surprises in two of the last four quarters (and met estimates in the other two quarters) with an average beat of 9.87%. The long-term expected earnings growth rate for this stock is an impressive 16.80%.      

Oceaneering reported first-quarter results on Apr 23, 2013. Earnings per share came in at 69 cents, surpassing the Zacks Consensus Estimate of 59 cents by 16.95%. The company's earnings per share figure also increased 46.80% as compared to the year-ago period. The beat was owing to robust performances from the Remotely Operated Vehicles and Subsea Products business units.

Based on its progress, Oceaneering raised its earnings per share projection for 2013 to $3.10- $3.30 from $3.00-$3.25. The company also predicts good performances in the operating activities from all its business units in the second quarter of 2013.

Additionally, Oceaneering's announcement of a 22.22% increase in its quarterly dividend in late Apr 2013 is another piece of positive news. We believe that the dividend hike not only highlights the company's commitment to create value for shareholders but also underlines its healthy financial condition and confidence in its business.

Finally, Oceaneering recently inked a deal with Italian oil and gas contractor, Saipem for the supply of umbilicals for the development of the Burullus West Delta Deep Marine Phase IXa project, which is based offshore Egypt. We believe that the company will be able to earn significant cash flow for its shareholders in the near future, owing to this contract.

Importantly, for 2013, more than half of the estimates (8 out of 13) were revised higher over the last 60 days, lifting the Zacks Consensus Estimate to $3.28 per share from $3.25.  

Other Stocks to Consider

In the oil field services sector, firms that are expected to significantly outperform the broader U.S equity market over the next one to three months are Compagnie G ( CGG ), Newpark Resources Inc. ( NR ) and Exterran Holdings Inc. ( EXH ). All the firms sport a Zacks Rank #1 (Strong Buy).



EXTERRAN HLDGS (EXH): Free Stock Analysis Report

NEWPARK RESOUR (NR): Free Stock Analysis Report

OCEANEERING INT (OII): Free Stock Analysis Report

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Zacks Investment Research