2 Energy Concerns With Momentum And Recent Positive Comments From Analysts

Includes: CAM, HP
by: Bret Jensen

Oil services stocks have been standout performers over the last month (See Chart) as signs that the North American rig market is near a trough as investors realized the sector has long term growth in front of it as domestic energy production continues to expand and additional technology is needed to bring hard to reach reservoirs of energy online. Here are two stocks in the sector that have received some positive comments this week and should have upside left despite recently hitting 52 week highs.

Cameron International Corporation (NYSE:CAM) provides flow equipment products, systems, and services worldwide. Its Drilling & Production Systems segment offers systems and equipment to control pressures and direct flows of oil and gas wells; and designs and manufactures structural components for land and offshore drilling rigs.

4 reasons CAM still has upside from $65 a share:

  1. Jefferies just reiterated its "Buy" rating on the shares. It also raised its price target from $63 to $70 a share. BMO Capital Markets also reiterated its "Outperform" rating on CAM this week while raising its price target from $65 to $70 a share.
  2. Earnings per share are projected to jump from just over $3 in FY2012 to just under $4 in FY2013. Consensus expectations call for over $5 a share in EPS in FY2014.
  3. Revenues are expected to show low mid-double digit growth in FY2013 and FY2014. The stock sports a five year projected PEG of under 1(.79).
  4. Cameron sells for less than 13x forward earnings, a discount to its five year average (15.9). The company also just reported new orders doubled. The stock just hit a 52 week high.

Helmerich & Payne (NYSE:HP) engages in the contract drilling of oil and gas wells. It provides drilling rigs, equipments, personnel, and camps on a contract basis to explore for and develop oil and gas from onshore areas and fixed platforms, tension-leg platforms, and spars in offshore areas.

4 reasons HP still has good growth prospects at under $65 a share:

  1. BMO Capital Markets reaffirmed its "outperform" rating on HP and raised its price target from $65 to $70 a share. In its earnings report this week, the company beat estimates on the top and the bottom line.
  2. Consensus earnings estimates for both FY2013 and FY2014 have risen by more than ten percent in the last three months.
  3. The company's balance sheet has no net debt. It has more than doubled operating cash flow (OCF) in the last three years and the stock sells for 6x OCF.
  4. The stock sells at less than 12x forward earnings, a slight discount to its five year average (13.5). The company has also beat earnings estimates five of the last six quarters.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.