Superior Energy Services (SPN) reported earnings on Thursday. The company became the latest oil services firm in my portfolio to easily beat analysts' estimates, joining Baker Hughes (BHI), Halliburton (HAL) and Schlumberger (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.