2 Rig Manufacturers With Rapid Revenue Growth Ahead Of Them

Includes: CAM, NOV
by: Bret Jensen

The Wall Street Journal had an excellent piece in today's newspaper that covered the aging oil and gas fleet, increased safety needs and rapidly rising construction demand due to improving fracking technology. It highlights the fast growing revenues at two oil rig manufacturers (outlined below) that seem like good growth plays to take advantage of these trends.

"Cameron International Corporation (NYSE:CAM) provides flow equipment products, systems, and services worldwide. Its Drilling and Production Systems segment offers systems and equipment to control pressures and direct flows of oil and gas wells, and designs and manufactures structural components for land and offshore drilling rigs." (Business description from Yahoo Finance)

4 reasons CAM is solid growth play at $57 a share:

  1. Earnings are ramping up. Cameron earned $2.67 a share in FY2011 and looks set to make $3.23 a share in FY2012. Analysts project $4.34 in EPS in FY2013.
  2. Revenues should grow some 20% in FY2012 and analysts expect almost 15% sales increases in FY2013 (From Yahoo Finance). The stock sports a five year projected PEG of under 1 (.97).
  3. Goldman resumed coverage on the stock with a "Buy" rating in August. Howard Weill also upgraded the stock to "Market Outperform" in July.
  4. The stock is selling at 13 times forward earnings, a discount to its five year average (16.2).

"National Oilwell Varco (NYSE:NOV) designs, constructs, manufactures, and sells systems, components, and products for oil and gas drilling and production, as well as providing oilfield services and supplies, and supply chain integration services to the upstream oil and gas industry worldwide." (Business description from Yahoo Finance)

4 reasons NOV still looks like a bargain at $84 a share:

  1. Consensus earnings estimates have moved up for FY2012 and FY2013 over the last two months. NOV has also beat earnings estimates each of the last four quarters.
  2. Sales should increase around 35% in FY2012 and analysts expect over 15% revenue growth in FY2013 as well (From Yahoo Finance). The stock has a five year projected PEG of under 1 (.82).
  3. The company has an A rated balance sheet and net cash on the balance sheet. S&P has a "Buy" rating and a $97 a share price target on the stock.
  4. Earnings are increasing at a nice clip. NOV made $4.77 a share in FY2011 and is on track to make just less than $6 a share in FY2012. Analysts project just under $7 a share in FY2013.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.