We are in the middle of earnings seasons and earnings reports are coming fast and furious. I constantly look at these reports to see how the companies in my portfolio are performing and also to ascertain if I can find any trends that can provide some good new opportunities. Today, I have noticed two energy concerns (one I already own) that blew away earnings estimates and deserve further consideration and possible investment.
Patterson-UTI Energy (NASDAQ:PTEN) provides onshore contract drilling services to oil and natural gas exploration and production companies in the United States and Canada.
4 reasons I like PTEN at just over $21 a share:
- The company reported earnings of 40 cents a share today, which easily beat consensus estimates by 12 cents a share. Revenues were also around 9% above consensus. It was the fourth quarter in row the company beat on the bottom line.
- The stock is cheap at under 10x trailing earnings and just 10% above book value.
- The company has more than doubled operating cash flow (OCF) over the last three years. The stock is priced at under 4x OCF.
- The stock is selling near the bottom of its five year valuation range based on P/E, P/CF, P/S and P/B.
NOTE: I have owned this stock since late May when it was selling at $14, but believe it still has further upside.
Noble Energy (NYSE:NBL) an independent energy company with crude oil and natural gas interests. Its principal projects comprise onshore US projects located in the DJ Basin and Marcellus Shale; Galapagos project located in the deepwater Gulf of Mexico; Tamar project located in the offshore Israel; and Aseng and Alen projects located in the offshore Equatorial Guinea.
4 reasons NBL still has upside from $114 a share:
- Revenues grew 30% Y/Y and the company reported record quarterly cash flow of $824 million as well as record annual cash flow of $2.9 billion for 2012. The company reported earnings of $1.65 a share, beating consensus by 52 cents a share.
- It also reported a discovery at Big Bend in the Gulf of Mexico and a new reservoir discovery at Carla offshore Equatorial Guinea in the quarter.
- Revenue growth is projected to be near 20% for FY2013 as new production comes online.
- The stock is selling at 17.5x forward earnings, but looks much more reasonably priced on an operating cash flow (OCF) perspective. The company has grown OCF by 50% over the last three years and the stock is going for just 8x OCF.
Disclosure: I am long PTEN. 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.