Pacific Drilling: A Strong Buy - Analyst Blog
November 19 2013 - 5:00PM
Zacks
On Nov 19, Zacks Investment
Research upgraded Pacific Drilling S.A. (PACD) to
a Zacks Rank #1 (Strong Buy).
Why the
Upgrade?
The offshore drilling contractor Pacific Drilling S.A. has
delivered positive earnings surprises in the last 4 quarters with
an average beat of 109.82%. Consistently good performance has
driven the company’s earnings estimates higher.
The Zacks Consensus Estimate for 2013 increased 23.5% in the last
30 days to 42 cents per share, reflecting estimated year-over-year
growth of 163.5%. For 2014, the consensus increased 14.1% over the
same time period to 81 cents per share, reflecting projected growth
of 91.1%.
In the third quarter, the company
reported earnings of 14 cents, beating the Zacks Consensus Estimate
by 75%. Pacific Drilling’s strong cash flow generation capability
enabled it to finance construction payments for Pacific Sharav and
Pacific Meltem drillships with cash on hand. The company was not
required to draw from its $1 billion senior secured credit
facility.
The addition of the new drillship,
Pacific Khamsin, by the end of this year will boost the company’s
revenues. We believe the cash generation ability of Pacific
Drilling and its $1.2 billion undrawn capacity under its credit
facilities will help it to fund the ongoing construction of three
additional drillships. The construction of new drillships indicates
robust demand in the long run.
The present valuation also makes the stock look attractive. The P/B
ratio of the company in the trailing twelve months was 1.08%, lower
than its industry peers of 1.20%. The Return of Equity of the
company in the trailing twelve months was 3.5%, higher than the
industry average of 2.9%.
Other Stocks to Consider
Besides Pacific Drilling S.A., other companies in the sector also
performing well include Helmerich & Payne,
Inc. (HP), Cimarex Energy Co. (XEC) and
Tesco Corporation (TESO). Helmerich & Payne
and Cimarex Energy Co. have a Zacks Rank #2 (Buy) while Tesco
Corporation has a Zacks Rank #1 (Strong Buy).
HELMERICH&PAYNE (HP): Free Stock Analysis Report
PACIFIC DRILLNG (PACD): Free Stock Analysis Report
TESCO CORP (TESO): Free Stock Analysis Report
CIMAREX ENERGY (XEC): Free Stock Analysis Report
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