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Late last month, contract drilling services provider, Helmerich & Payne Inc. (HP) announced its financial results for the third fiscal quarter of 2010 (three months ended June 30, 2010).

Now that the Wall Street analysts have had some time to digest the quarterly performance of Helmerich & Payne, they are weighing in their estimate revisions. Below we cover the results of the recent earnings announcement, subsequent analyst estimate revisions and Zacks ratings for the outlook for the stock.

Earnings Review

On July 29, 2010, Helmerich & Payne reported third quarter 2010 results that came in better than expected, helped by improving U.S. land drilling operations.

Earnings per share, excluding an impairment charge on assets seized in Venezuela, came in at 61 cents, surpassing the Zacks Consensus Estimate of 59 cents. Revenues of $483.4 million were also ahead of Zacks Consensus Estimate of $449.0 million.

Agreement of Estimate Revisions

There is a strong positive agreement among the analysts regarding Helmerich & Payne’s outlook. In particular, we see a notable number of estimate revisions over the past 30 days, indicating that the revisions were in response to the company’s third quarter earnings release.

Out of 20 analysts covering the stock, 12 have revised their estimates upward for 2010, while 1 has gone in the opposite direction. Looking forward to 2011, the trend is more or less similar. Out of 20 analysts, 13 hiked their estimates compared with no negative revisions.

Estimates are up for the September quarter of 2010 as well. For the current quarter, 12 of the 19 analysts have increased their estimates over the last 30 days, as compared with no downward revisions.

This uptrend in estimate revisions reflects strengthening drilling activity, together with improving utilization and dayrates (particularly for the scarce high-specification drilling assets).

Magnitude of Estimate Revisions

As a result of the analysts revising estimates over the past 30 days, the Zacks Consensus Estimates for fiscal 2010 and 2011 have gone up 8 cents (from $2.39 to $2.47) and 25 cents (from $2.59 to $2.84), respectively. Meanwhile, the estimate for the September 2010 quarter is up by 5 cents. The increases are based on the expectations of high demand for Helmerich & Payne’s newer, efficient rig fleet, driven by the development of unconventional gas and oil plays including the Haynesville, Marcellus, Eagle Ford, Bakken, etc.

Our Recommendation

Helmerich & Payne is a leading drilling contractor with activities in the U.S. and overseas. The company, with its young, efficient drilling fleet, has been able to snag market share and maintain a relatively higher utilization due to a stronger drilling demand and longer duration of term contracts for their technologically-sophisticated FlexRigs. A relatively conservative financial policy and a high quality client base are other positives in the Helmerich & Payne story. However, the current supply overhang in the natural gas market, which will continue to weigh on the company’s dayrates and margins during the next few quarters, remains a key area of concern, in our view. We see the stock performing in line with the broader market and rate it as Neutral.

Disclosure: None

Source: Helmerich & Payne: Earnings Scorecard