Drill, baby, drill. Oil States International, Inc. (OIS) is still on track to grow earnings by the double digits in both 2011 and 2012 as drilling remains strong. Shares of this Zacks #2 Rank (buy) have bounced back from the summer sell-off but still trade with attractive valuations.
Oil States has two major divisions: Offshore Products and Well Site Services. Offshore Products manufactures deepwater capital equipment which is used on floating production platforms, subsea pipelines and floating drilling rigs.
Well Site Services provides land drilling with its fit-for-purpose drilling rigs in West Texas and the Rocky Mountain region.
The company rents tools to producers to be used in completion and production of a well. Oil States’ rental tool division is focused on the Rockies, Barnett Shale, the Mid Continent and in the Fayetteville Shale oil producing regions and is growing in the popular Marcellus, Haynesville and Bakken shale regions.
Oil States Surprised on the Zacks Consensus Again
On Nov 3, Oil States reported its third quarter earnings and beat the Zacks Consensus Estimate for the 16th straight quarter. It has only missed once in the last 5 years. That’s an extremely impressive earnings surprise streak given the Great Recession falls in that period.
Earnings per share were $1.67 compared to the Zacks Consensus Estimate of $1.48. It made just 88 cents per share in the year ago period.
Revenue jumped 53% to $902.6 million from $588.3 million. About $70 million in the increase in revenue was due to acquisitions which closed in the fourth quarter of 2010 but the rest was due to improved earnings in each of the company’s business segments.
Well site services revenue jumped 37% due to higher revenues and margins in the rental tools business and stronger land drilling utilization and margins. The rental tools business is benefiting from increased drilling and completion activity in the Bakken, Eagle Ford, Marcellus and Permian Basin regions.
Double Digit Earnings Growth Projected in 2011 and 2012
2011 is expected to be a very good year for Oil States. After the third quarter earnings report, analysts raised their estimates. This pushed the 2011 Zacks Consensus Estimate up to $5.83 from $5.58.
That is earnings growth of 75%.
The good times are expected to keep rolling into 2012 as the 2012 Zacks Consensus rose to $7.07 from $6.79 in the last 60 days for further earnings growth of 21.4%.
Valuation Is Attractive
As if getting double digit earnings growth wasn’t enough, Oil States is a value stock. It trades with a forward P/E of 12, which is under the 15x level that is usually the cut-off for value stocks.
The company also has a price-to-book ratio of 2.0. A P/B under 3.0 usually indicates value.
Shares Have Bounced Back
Shares took a dive over the summer as the rest of the market sold off.
The company acknowledged in its third quarter press release that the turmoil in the overall markets affected its stock price but business remained strong during that period across all of its business segments.
While the summer sell-off might have been a buying opportunity, the company still has the double threat of both double digit earnings growth and low valuations.
With drilling expected to remain strong in 2012, Oil States is a way to get in on the energy play.
This Week’s Aggressive Growth Zacks Rank Buy Stocks
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Kforce (KFRC) is a Zacks #1 Rank (Strong Buy) thanks to upward revisions following its November earnings release. Growth rates are rising but you can still get shares of KFRC at a good price. Read the full article.
Titan Machinery Inc. (TITN) has given investors plenty to sink their teeth into with its earnings report last week. Revenues and earnings were up, pushing estimates higher and valuations are looking great. So why aren’t investors scooping up shares? Read the full article.
Credit Acceptance Corporation (CACC) surged on its latest earnings surprise, but is it too late to get into this Zacks #1 Rank (Strong Buy)? Read the full article.
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.
