Weatherford: Interesting Energy Equipment Play

Houston, Texas-based Weatherford International, Ltd. (NYSE:WFT) is a leading manufacturer and provider of equipment and services used in drilling, completion, and production of oil and natural gas wells.

We are upgrading Weatherford shares to Buy from Hold following the recent commodity-price induced weakness in the stock, which has made valuation very compelling for this quality oilfield name. The stock is down roughly 35% in the last 12 weeks, compared to the peer group's average of a 26% pullback and the roughly 4% decline in the broader S&P 500.

Concerns about the company's overexposure to North American onshore drilling in a tentative natural gas price environment are overdone, in our view. The company has a growing international footprint, where the outlook for its integrated project management expertise remains very favorable. Our unchanged $37 price objective reflects 2009 P/E and EV/EBITDA multiples of 12.8x and 7.5x, respectively, well within historical trading ranges.