On Mar 20, Zacks Investment Research upgraded Dawson Geophysical Company (DWSN) to a Zacks Rank #1 (Strong Buy).
Why the Upgrade?
The company has registered an earnings surprise of 16.13% in the first quarter of fiscal 2013, bouncing back from the negative surprises reported in the last two quarters of fiscal 2012. Net income in the first quarter 2013 catapulted 154% sequentially on the back of operational efficiencies and higher utilization rates. The long-term expected earnings growth rate for this stock is 15.0%.
Dawson Geophysical has a favorable order book and projects concentrated in the oil and liquids-rich basins of the Bakken Shale, Mississippi Lime, Eagle Ford Shale, Marcellus Shale and Permian Basin. These contracts will allow the company to sustain 14 crew operations for the best part of calendar 2013.
The company has a strong financial position with its current ratio presently at 2.34. This clearly indicates that Dawson Geophysical has enough liquidity to meet its short-term obligations. In addition the company has $20 million available under its revolving credit facility.
Advance equipment purchase is a vital element of the company’s operational success. Dawson Geophysical raised its fiscal 2013 capital budget by $10 million to $50 million. Dawson Geophysical will use a portion of this budget to purchase additional cable-less recording equipment and energy source units, which will further strengthen its operations.
The Zacks Consensus Estimate for fiscal 2013 of $1.51 per share reflects year-over-year growth of 23.57%. For fiscal 2014, the Zacks Consensus Estimate of $1.88 per share reflects projected growth of 24.71% year over year.
Other Stocks to Consider
Other than Dawson Geophysical Company, a few other oil and gas equipment service companies are also performing well and have a favorable Zacks Rank. We note that the U.S. oil and gas sector is expected to do well in 2013 with rising production and mounting oil prices, boding well for oil and gas equipment service firms. The stocks worth considering are Compressco Partners, L.P. (GSJK), Exterran Partners, L.P. (EXLP) and RPC Inc. (RES). All of them presently have a Zacks Rank #1 (Strong Buy).
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