Estimates have been surging for RPC, Inc. (RES) after the company delivered excellent results for the second quarter of 2011. Revenue jumped 75% year-over-year and EPS more than doubled as business remains exceptionally strong.
It is a Zacks #2 Rank (Buy) stock.
Analysts expect the stellar growth to continue over the next two years. Based on consensus estimates, analysts project 115% EPS growth this year and 24% growth next year.
On top of this growth, the company pays a dividend that yields a solid 1.4%. Valuation is attractive too, with shares trading well below their historical median.
Company Description
RPC, Inc. provides a wide range of specialized oilfield services primarily to companies engaged in exploration, production and development of oil and gas properties.
The company is headquartered in Atlanta, Georgia and has a market cap of $3.4 billion.
Second Quarter Results
RPC reported strong second quarter results on July 27. Revenues surged 75% year-over-year to $443 million, well ahead of the Zacks Consensus Estimate of $410 million. This increase was driven by higher activity levels, a larger equipment fleet and improved pricing.
The cost of revenues declined 40 basis points to 54.8% of revenues due to leveraging of fixed employment costs. Meanwhile, operating profit more than doubled to $119 million as the company leveraged its selling, general and administrative expenses.
Earnings per share jumped 138% to 50 cents per share. This was in-line with the Zacks Consensus Estimate.
Outlook
Although EPS came in at expectations, analysts revised their estimates for both 2011 and 2012 sharply higher, sending the stock to a Zacks #2 Rank (Buy).
The Zacks Consensus Estimate jumped from $2.05 before the earnings release to $2.15 after it. This corresponds with 115% growth over 2010 EPS. The 2012 consensus estimate rose from $2.34 to $2.68 over the same period. This represents 24% annual EPS growth.
Analysts expect the oilfield services industry to remain strong over at least the next few quarters, which will continue to drive pricing higher. Many feel that fears over a cyclical slowdown are overblown.
Consensus estimates have risen sharply over the last several months, as seen in the company’s Price & Consensus chart:
Dividend
RPC, Inc. has been aggressively raising its dividend over the last few years as revenue and profits have grown strongly. Since 2004, for instance, RPC has raised its dividend at a compound annual rate of 44%.
It currently yields 1.4%.
Valuation
Shares of RES have held up relatively well during the recent market carnage, but it has not been completely immune. The stock trades at just 9.1x 12-month forward earnings, a significant discount to the industry average of 14.5x and its historical median of 14.8x.
The Bottom Line
With rising earnings estimates, excellent growth projections and a solid dividend, RPC, Inc. looks attractively priced at just 9.1x forward earnings.
Todd Bunton is the Growth & Income Stock Strategist for Zacks Investment Research.
Zacks Investment Research
