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Nabors Industries (NBR) became the latest oil services firm to easily beat earnings estimates on Wednesday. It joins Halliburton (HAL), Baker Hughes (BHI) and Schlumberger (SLB) in that regard. The whole sector has been unfairly punished by overly pessimistic projections of exploration growth due to low natural gas prices. The stock also still looks like it has plenty of room on the upside.

Highlights from Nabors earnings report:

  • Nabors beat revenue estimates by $40mm which is up 31% Y/Y.
  • EPS came in at 65 cents a share, easily beating estimates of 50 cents a share.
  • Management is committed to sell as much as $800 million of oil and natural-gas assets and business units this year and focus on drilling and production services.
  • Nabors also signed long-term contracts for nine new-build rigs in the quarter.

Nabor Industries - "Nabors Industries Ltd., together with its subsidiaries, operates as a land drilling contractor worldwide. The company markets approximately 499 land drilling rigs for oil and gas land drilling operations in the United States Lower 48 states, Alaska, Canada, South America, Mexico, the Middle East, the Far East, the South Pacific, Russia, and Africa." (Business Description from Yahoo Finance)

4 additional reasons Nabors is still deeply undervalued at just over $16 a share:

  • Even after an almost 7% pop on Wednesday, Nabors is significantly under analysts' price targets. The median price target of the 20 analysts that cover the stock is $26.50. Argus upgraded the stock to a "Buy" in February and Credit Suisse has an "Outperform" rating and a $27 price target on the stock.
  • This marks the fourth straight quarter Nabors has easily beat estimates as analysts consistently underestimate its growth potential which explains its low five year projected PEG (.36)
  • The company has a forward PE of around 6.5, which is a 50% discount to its five year average (13)
  • The stock is cheap at under 4 times operating cash flow and just 82% of book value.
Source: Nabors Becomes Latest Oil Services Firm To Blow Through Estimates