Oil Services stocks are off to a strong start in 2013. The sector has provided roughly double the return of S&P over the last month (See Chart). Given the sector has still underperformed the overall market by some 10% over the last year and the continuing expansion of domestic energy production as well as new finds overseas; the outlook for the sector looks good over the long term. Here are two companies in the industry that received upgrades and/or price target upward revisions last week. Both look cheap based on their growth prospects.
Hornbeck Offshore Services (NYSE:HOS) provides marine transportation services to exploration and production, oilfield service, offshore construction, and the United States military customers. The company operates in two segments, Upstream and Downstream.
4 reasons HOS is a good growth play at under $44 a share:
- Both Williams Financial and ISI Group reiterated their "Buy" and "Strong Buy" ratings on HOS last week. Both firms also raised their price targets to $52 a share from the mid-40's prior as well.
- The company is projected to grow revenues at just under 15% in FY2013 and over 35% in FY2014. The stock trades for a five year projected PEG of under 1 (.85).
- Given the company's growth prospects, the stock is attractive at just over 11x 2014's projected EPS.
- The company is well positioned to benefit from the expansion in the Eagle Ford shale region and increased drilling activity in the Gulf of Mexico.
Tetra Technologies (NYSE:TTI) operates as a diversified oil and gas services company. The company operates in three divisions: Fluids, Production Enhancement, and Offshore.
Four reasons TTI can go higher from $9 a share:
- Stern Agee just lifted their rating from "Neutral" to "Buy" and upped its price target to $12 a share.
- Revenue growth is projected to triple over 2012 to 12% in FY2013. The stock has a small five year projected PEG (.54)
- Several insiders bought over a $1mm in new shares in November. I made a small purchase in late November on the back of this insider buying.
- Tetra sells for less than 12x forward earnings. The median price target by the 8 analysts that cover the shares is $12 a share, some 30% above the stock's current price.