Parker Drilling Company - Value
July 08 2012 - 8:00PM
Zacks
The energy stocks just keep getting cheaper.
Parker Drilling
Company (PKD) has seen its shares plunge in 2012 on fears about
falling natural gas prices. But that means this Zacks #1 Rank
(Strong Buy) is cheaper than ever, with a forward P/E of just 6.2.
Parker Drilling provides contract drilling
solutions, rental tools and project management to the energy
industry.
It has 24 land rigs and 2 offshore barge rigs in
its international fleet. Its U.S. fleet consists of 13 barge rigs
in the Gulf of Mexico, 1 land rig located in the U.S. and 2 land
rigs in Alaska undergoing commissioning.
The company's rental tool segment supplies
equipment to operators on land and offshore in the U.S. and some
international markets.
Parker Beat Again In Q1
On May 2, Parker reported its first quarter results
and surprised on the Zacks Consensus by 29.4%. Earnings per share
were 22 cents compared to the consensus of just 17 cents. That is
well above the 4 cents it made a year ago. It was also the fourth
earnings surprise in a row.
Revenue rose 13% to $176.6 million from $156.2
million a year ago.
Despite the chaos in the industry as natural gas
prices fell and explorers moved into the liquids arena, Parker was
able to position itself to capitalize.
The Rental Tools segment grew revenue 27% to $66.3
million from $52.3 million as demand for premium drill pipe and
related products for U.S. drilling continued to expand.
The U.S. Barge Drilling segment also boosted the
quarter as revenue rose 75% to $27.8 million from $15.9 million as
drilling demand in the coastal waters of the Gulf of Mexico
remained strong.
Bullish On 2012
In May, the company was still bullish on the
outlook for the rest of the year.
"Our current business activity and the expected
trends in our markets should support continued strength in our
business," said Robert Parker Jr., President and CEO.
"Oil-directed and gas liquids-directed drilling
continues to expand in the U.S., both on land and in the coastal
waters of the U.S. Gulf of Mexico. In addition, the U.S. land
drilling market continues to grow footage drilled, a prime
indicator of demand for drill pipe and other rental tools," he
added.
Analysts Still Like The Story
1 estimate has been revised higher for 2012 in the
last 30 days which has pushed the Zacks Consensus up to 79 cents
from 78 cents.
This is earnings growth of 46% as the company made
just 54 cents in 2011.
Dirt Cheap Stock
Shares have been cheap for awhile but the sell off
in 2012 has made them dirt cheap.
In addition to an incredibly low P/E of just 6.2,
it also has a price-to-book ratio of 1.0 which is well below the
3.0 cut-off I use for value.
Parker also has a price-to-sales ratio of only 0.8.
A P/S ratio under 1.0 can indicate that a company is
undervalued.
Investors are running scared from the energy
sector. But for value investors, Parker Drilling provides an
opportunity to get in at a very attractive level.
Tracey Ryniec is the Value Stock Strategist for
Zacks.com. She is also the Editor of the Turnaround Trader and
Insider Trader services. You can follow her on twitter at
traceyryniec.
PARKER DRILLING (PKD): Free Stock Analysis Report
PARKER DRILLING (PKD): Free Stock Analysis Report
To read this article on Zacks.com click here.