Why the Upgrade?
The offshore drilling contractor Pacific Drilling S.A. has delivered positive earnings surprises in the last 3 quarters with an average beat of 121.43%. Consistently good performance has driven the company's earnings estimates higher.
The Zacks Consensus Estimate for 2013 increased 9.7% in the last 60 days to 34 cents per share, reflecting year-over-year growth of 115.6%. For 2014, the consensus increased 112.2% over the same time period to 73 cents per share, reflecting growth of 112.2%.
In the first half of 2013 the company invested $217.5 million. Pacific Drilling expects to invest $1.9 billion for the construction of its four new drillships. The construction of new drillships indicates there will be demand in the long run.
In addition, the upgrade of existing rigs as per customer specification will also help the company to increase its customer base.
The present valuation also makes the stock attractive. The P/B ratio of the company in the trailing twelve months is 1.05%, which is lower than its industry peers of 1.13%. The Return of Equity of the company in the trailing twelve months was 2.2%, higher than the industry average of 1.7%.
Other Stocks to Consider
Besides Pacific Drilling S.A., other companies in the sector are also performing well and have a favorable Zacks Rank. The stocks worth considering are Ocean Rig UDW Inc. ( ORIG ), Seadrill Partners LLC ( SDLP ) and Pioneer Energy Services Corp. ( PES ). Ocean Rig UDW and Seadrill Partners have a Zacks Rank #1 (Strong Buy) while Pioneer Energy Services has a Zacks Rank #1 (Strong Buy).