Energy Concern Reports 'Superior' Quarter And Still Has Substantial Upside

| About: Superior Energy (SPN)

Superior Energy Services (NYSE:SPN) reported earnings on Thursday. The company became the latest oil services firm in my portfolio to easily beat analysts' estimates, joining Baker Hughes (NYSE:BHI), Halliburton (NYSE:HAL) and Schlumberger (NYSE:SLB). Analysts have continuously overestimated the impact of low natural gas prices and reduce exploration in that sector on oil services stock's earnings. I think the sector and Superior offer compelling values for investors at current prices.

Key earnings highlights from SPN's report:

  • Earnings came in at 42 cents per diluted share vs. 19 cents during this quarter last year.
  • First quarter revenue grew 151% Y/Y to over $966mm
  • The company raised its FY2012 full year guidance to $3.30 to $3.60 vs. previous guidance of $3.20 to $3.60 and over current analysts' estimates of $3.29 a share.

4 reasons Superior still has significant upside from under $27 a share:

  • The stock is going for less than 7 times forward earnings, which is substantially under its five year historical average (11.9).
  • SPN sells for a ridiculously low five year projected PEG (.20) and 9 times operating cash flow.
  • The stock is 50% under analysts' price targets. The median price target by the 10 analysts that cover the stock is $41 a share. Howard Weil made SPN a "Focus Stock" earlier in the month as well.
  • Consensus estimates for FY2012 had risen significantly over the past few months before this latest earnings report. I would look for them to increase further given the company's guidance. Future growth looks solid as well, as analysts expect 17% revenue growth in FY2013.

Disclosure: I am long BHI, HAL, SLB, SPN.