The oil services sector (OIH) has had a tough start to the week (see chart) on the back of a warning from oil services giant Schlumberger (SLB) stating that they see North American drilling activity and rig count in the first quarter lighter than it expected. Credit Suisse has a different view for full year 2013 and it expects the rig count to rise by 130-170 rigs by the end of the year. Given the continued expansion of oil & gas production in North America, I believe Credit Suisse has the right longer term view. Here are three oil services stocks the analyst firm likes at these levels.
Forum Energy Technologies (FET) provides manufactured technologies and applied products to the energy industry.
4 reasons FET is a good growth play at under $27 a share:
- The company is predicted to have 12% revenue growth for both FY2013 and FY2014. The stock is selling with a five year projected PEG of under 1 (.73).
- Forum sells at a reasonable 12x FY2014's earnings.
- The median price target by the 12 analysts that cover the stock is $31 a share. FBR Capital upgraded the shares to "Outperform" in February.
- The company has more than doubled operating cash flow over the past two fiscal years. It also just won a contract from Helix Energy (HLX) to supply the energy concern a couple of remotely controlled vehicles.
Superior Energy Services (SPN) provides specialized oilfield services and equipment to oil and gas companies.
4 reasons SPN has value at just over $25 a share:
- SPN is cheap at just 98% of book value and under 10x trailing earnings.
- The company is projected to grow revenues at around an average 8% CAGR over the next two years and the stock sports a five year projected PEG of under 1 (.67).
- The stock is selling near the bottom of its five year valuation range based on P/CF, P/S and P/CF.
- The 15 analysts that cover the stock have a $31 median price target on the shares. The company has doubled operating cash flow (OCF) and the stock is selling at just four times OCF.
Halliburton (HAL) is one of the largest oil services firm in the world.
4 reasons HAL is a buy at under $40 a share:
- The 27 analysts that cover the stock have a $48 median price target on the shares.
- The company has beat earnings estimates 10 of the last 12 quarters (it was in-line on earnings the other two quarters).
- HAL is another oil services stock that is selling with a five year projected PEG of under 1 (.85).
- The company has grown operating cash flow by better than 65% over the last two fiscal years and the stock is selling in the bottom half of its five year valuation range based on P/E, P/CF, P/S and P/B.