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Noble Corp. Message Board

  • stan1736 stan1736 Aug 20, 2013 9:06 AM Flag

    Analyst ratings confusion

    Within the past month, Credit Suisse rates NE as Outperform, with a $55 target; Goldman has NE on " 40 cheapest stocks " list; now UBS downgrade to Neutral, with $41 target. Considering the $16B backlog, positive earnings estimates ( $2.89 for this year, $4.57 for 2014 ) and possible spinoff of assets ( " a transformative event ") later this year, the probable drop in share price following today's downgrade may represent a buying opportunity.

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    • Quite frankly, if you listen to ratings you will do very, very poorly. How often are bad stocks downgraded after plunging(not before)? All the time, the opposite is often true as well.

    • If there is a rig oversupply leading to lower earnings, i don't think the resulting performance will be due to 'multiple compression'....but whatever. Obviously a dip in rates on lower spec rigs is a real risk, but those rigs have an ever decreasing piece of the pie for the same companies building the new high spec rigs. The forward EV/EBITDA on NE/ESV/ATW is pretty cheap now. I think the Ensco 5000s and Homer Ferringtons of the world will still find gainful employment for several more years...

      That said, I do usually sell calls on ESV and NE on the same targets she has listed, so it's not that I disagree with her...

      UBS downgrades offshore drillers, warns of 'short-term bubble'

      UBS has downgraded and cut price targets on several offshore drilling companies, worried that a “short-term bubble” may be forming as a result of a flood of new rig capacity.

      UBS analyst Angie Sedita slapped “hold” ratings on Diamond Offshore Drilling Inc., Ensco Plc, Noble Corp. and Transocean Ltd. They were previously rated “buy.” She maintained a “buy” rating on a fifth drilling company she covers, Rowan Cos. Inc.

      “Today we are increasingly cautious on the intermediate-term outlook for the floater market, which we believe will translate to modest multiple compression,” Ms. Sedita said in a note.

      “We believe the long-term demand for the ultra-deepwater market is strong and growing. However, over the near-term a substantial amount of newbuild rig capacity is entering the market and we believe there is risk to the mid-water and deepwater markets both for utilization (idle time between contacts) and potentially some dayrate softness on the lower specification, non-harsh environment rigs,” she added.

      Targets: UBS price targets of the firms are now as follows: Diamond Offshore $68; Ensco $60; Noble $41; Transocean $49; Rowan $43

      • 1 Reply to fauxcow
      • I think these analysts are looking at it wrong. It would be different if these stocks had rallied in a frothy manner into the increasing dayrates, but they havent. ESV for instance is down on the year and is trading for less than 3 bucks above book value. On their conference call they said they saw good demand for all their rigs with good pricing. I'll believe the company over the analysts. Not only that but with revenues increasing strongly over the next year, and a nice dividend with a very high likelihood of dividend increases, I think a 15% selloff from it's 52 week high is a pretty good deal. These analysts are often late in their calls. Why not tell people to sell 10 pts. ago rather than at close to BV with a stock that will have strong revenue growth with a good dividend?

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